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ANSI  and  ISO  TEST  CHART  No    2 


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M.  -APPLIED   !M^GE     Inc 

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WHERE  AND  WHY 
PUBLIC  OWNERSHIP   HAS   FAILED 


'^^^^y^ 


THE   MACMILLAN   COMPANY 

NEW  YORK    •    BOSTON    •    CHICAGO 
DALLAS    ■    ATLANTA    •    SAN    KRANCISCO 

MACMILLAN  &  CO.,  Limitbd 

LONDON    ■    BOMBAY    •    CALCUTTA 
MELBOURNE 

THE  MACMILLAN  CO.  OF  CANADA,  Ltd. 

TOkONTO 


J 


WHERE  AND  WHY 

PUBLIC    OWNERSHIP 

HAS    FAILED 


BY 

YVES   CUYOT 


KUITOR.IN-,:«.EF     OF     THK.     J.n-RNAI.     DKS     F.ONOMISTES,     PgESIDKNT     Of     THE     SCI'tE 

U  K.ONOMIK    I-uLlT.yi  K  „,   ,.^K.^,  U,  V,„KK  ,,t    nil.  AMKKK  AN  A.ADEUY  OK  PuLlT,,  AL 

AND   S.K:UL    SCIENIE.    HON.  UKMUKR    OK    THE    ROYAL   STATISTICAL   SOCIETY    AND 

THE    lOBDEN    (;I.U1<    OF    GREAT    BRITAIN,    FORMER    Vl(  E-PRESIDENT   OF    THE 

MUNICIPAL    COLTNCIL   OF    PARIS,    DEPUTY    TO   TBK    FRENCH    PARLIA- 

IIENT  AM)   UWIHTLR   OF    .'UBLK     WORKS,   ETC.,   ETC. 


TRANSLATED   FROM    THK    FRENCH    BY 

H.  F.  BAKER 


THE    MACMILLAN    COMPANY 
1914 

Alt  rights  restrfid 


\  )•• 


V    -7     >- 


18118  7 


Comuoirr,  1914 

Bt  the  macmillan  company 


Set  up  and  electro typ«<l.     I'ubllsh^U  March,  1914. 


PREFACE 

The  chief  difficulty  m  prepann^r  this  hook  has  been 
t')  make  a  cchcrent  arran.^cment  of  tl,e  material  as 
tlic  various  sources  from  which  it  has  been  ^^ithered 
are  more  or  less  incomplete.  Indeed  the  .,l)stacles  in 
the  way  of  presenting  a  true  picture  of  industrial  en- 
terprises, as  operated  by  states  and  local  governments 
can  scarcely  be  exaggerated. 

The  partisans  of  government  and  municipal  owner- 
ship of  every  species  of  public  utility  have  assumed  a 
distinctive  title.     They  call  themselves  representatives 
of  the  movement  for  direct  operation   {Rcprcscntants 
dela  Regie  Dirccte).  Their  leader  in  France  is  Edgard 
Milhaud.  occupying  the  chair  of  Political  bxonomy  at 
the  Lmversity  of  Geneva,  where  he  makes  a  special 
point  of  emphasizing  Socialism.^    In  a  little  periodical 
entitled  Annales  dc  la  Regie  Dirccte,  he  presents  the 
case  for  all  government  and  municipal  undertakings 
although  his  enthusiasm  frequently  receives  cruel  set- 
backs, as  in  the  suicide  of  the  Mayor  of  Elbeuf      He 
has  also  published  several  articles  for  the  purpose  of 
demonstrating  that  accidents  are  much  less   frequent 
upon  government  railways  than  upon  the  lines  of  pri- 
vate companies.     We  shall  see  later  (Book  3,  Chapter 
•  See  La  Democratie  Socialiste  Allemande.   Paris,  F.  Mean. 


WIIKRK    AND    WHY     I'VULIC    ()\V  NERSUH'     HAS    lAll.l  D 


2  )  the  value  of  these  attempts  to  justify  his  creed,  and 
we  may  judj^e  from  ihcm  the  importance  that  is  to  be 
attached  to  his  other  statements. 

I-'or  the  academic  year  1911-1912,  L'Ecolc  dcs 
1 1  antes  fitudcs  Socialcs  orj^anized  a  series  of  confer- 
ences on  the  subject  of  pubbc  operation  imder  the  direc- 
tion of  M.  Milhad('  Tt  was  considered  advisable  that 
at  the  close  of  this  series  a  dissenting  voice  should 
be  heard— a  role  ultimately  assigned  to  me.  In  addi- 
tion to  ten  preceding  lectures,  wherein  the  whole 
theory  and  practice  of  Socialism  had  been  set  forth. 
M.  Milhaud  was  a.  si>eak  for  forty  minutes,  after 
which  I  was  to  be  allotted  forty  in  w^hich  to  refute 
the  points  previously  develoi)ed  by  him  during  640 
nnnutes.  Then  we  were  both  to  be  allowed  twenty 
minutes  in  order  to  sum  up  our  arguments.  I  had  at 
least  the  satisfaction  of  knowing  that  L'llumanitc  ^ 
attached  sufficient  im])ortance  to  this  conference  to  an- 
nounce that  for  several  ilays  before  it  was  to  take  place 
entrance  tickets  would  be  reserved  for  "comrades" ; 
under  which  conditic^ns  it  was  not  difficult  to  foresee 
that  the  hall  would  be  converted  into  a  public  assembly 

room. 

Flis  audience,  thus  prepared  and  won  over,  natur- 
ally gave  M.  iMilhaud  an  enthusiastic  welcome.  How- 
ever, despite  some  murmurs,  it  proved  itself  not 
unwilling  to  allow  me  to  oppose  my  facts  to  his  state- 
ments. 

I  borrow  from  the  report  of  the  discussion,  as 
published  in  L'Humanitc,  November  14.  1911,  the  fol- 
lowing resume  (d"  I'le  argument  of  M.  Milhaud: 

'  The  organ  of  the  Sociali.-it  propaganda. 

vi 


PREFACE 

"Private  monopoly,  seeking  nothing  but  maximum 
profit,  is  far  more  costly  than  public  monopoly,  which  is 
not  bound  by  the  same  conditions.  Money  costs  public 
enterprises  less,  and.  therefore,  they  can  amortize  their 
debt  and  thus  reduce  general  expenses.  On  the  o*her 
hand,  heavier  expenses  for  labor  can  be  supported  by 
public  undertakings.  The  management  of  a  public  enter- 
prise can  even  hope  for  profit,  and  all  this  can  be  accom- 
plished within  less  rigid  limits  than  those  which  neces- 
sarily confine  private  monopoly. 

"Milhaud  concluded  by  outlining  the  tendency  of  pub- 
lic enterprises  to  become  administrative  autonomies.  In 
order  that  they  may  escape  pernicious  bureaucratic  influ- 
ences, they  are  being  transformed  into  separate  commer- 
cial entities.  Through  increased  control  by  the  con- 
sumer, on  the  one  hand,  and  by  labor  on  the  other,  they 
are  being  gradually  but  completely  socialized. 

"Through  reduction  in  prices,  these  enterprises  create 
larger  bodies  of  consumers,  and  they  also  bring  about 
more  flexible  relations  between  employers  and  employed. 
The  representatives  of  collectivism,  individual  consumers 
and  producers,  may  thus  unite  in  behalf  of  social 
progress." 


When  we  come  to  examine  the  assertions  of  the 
propagandists  of  public  operation,  we  perceive  that 
they  are  of  no  better  cjuality  than  any  other  Socialist 
theories;  hut  the  assured  manner  with  which  these 
statements  are  declared  succeeds  in  disturbing  and  in- 
timidating many  people.  Yet,  in  the  elections  of  1910, 
Paul  Forsans,  President  of  La  SocieiJ  dcs  Intcrcts 
ficonounqucs.  was  able  to  organize  a  vigorous  cam- 
paign against  an  alcohol  and  insurance  monopoly. 

French  Socialists,  unable  to  appeal  to  the  experience 

vii 


WHERE   AND   WHY   PUBLIC   OWNERSHIP    HAS    FAILED 

of  the  Western  (state)  railroad,  or  the  exf>erience  of 
the  town  of  Elbeuf,  say :  "Very  good,  but  in  ^russia 
the  state  railways  are  altogether  satisfactory,  and,  in 
all  the  important  cities  of  Great  Britain,  Municipal  So- 
cialism is  enjo)'ing  a  veritable  triumph." 

Such  partisans  quote  the  testimony  of  public  depart- 
ments, never  weary  of  boasting  of  their  own  success- 
ful administration,  and  of  municipalities  which,  in- 
spired by  local  pride,  declare  that  they  have  accom- 
plished miracles.  But  how  can  we  accept  these  preju- 
diced certificates  of  good  conduct  until  we  have  been 
privileged  to  make  a  detailed  inventory? 

There  is  a  crying  need  at  the  present  time  for  col- 
lections of  precise  facts,  which  shall  show  the  vanity 
and  "blufif"  of  Socialist  programs,  and  such  facts  must 
be  placed  before  the  public.  My  sole  object  in  writ- 
ing this  book  has  been  to  present  just  such  a  compila- 
tion of  rigidly  investigated,  authentic  facts  and  figures 
regarding  public  ownership  and  operation.  If  I  have 
not  been  able  to  affirm  that  government  and  municipal 
undertakings  are  efficient  the  fault  is  not  mine.  I  have 
not  found  them  so. 

A  well-known  American,  Arthur  Hadley,  President 
of  Yale  University,  says,  in  his  book  entitled  Eco- 
nomics: 

"The  advantages  of  intervention  on  the  part  of  a 
government  are  visible  and  tangible  facts :  The  evil  that 
results  from  such  intervention  is  much  more  indirect  and 
can  only  be  appreciated  after  close  and  intensive  study." 


T  have  vainly  sought   for  the  benefit  arising   'mm 
public  operation  by  states  and  municipalities.     On  the 


vm 


PKEFACE 

contrary  an  unbiassed   survey  of  the   whole  subject 
forces  me  to  testify  to  the  resulting  harm. 

Y.  G. 

November,   19 12. 

For   the    American   edition   the    facts    and    figures 
herein  set  forth  have  been  brought  up  to  date— June 
1913- 


IX 


TRANSLATOR'S   NOTE 

Tlie  translation  has  been  read  and  reviscvl  by  the 
Author.  Otherwise  my  hearty  thanks  for  most  valu- 
able assistance  iriven  in  translation  are  due  to  Miss 
Elise  Warren  and  Mr.  William  D.  Kerr. 


CONTENTS 


I. 

II. 

III. 

IV. 


BOOK   I 
Public  and  Private  Trading  Operations 

„,  PAGE 

1  WO  Precepts j 

The  Three  Alain-Springs  of  Human  Action 2 

Determining  Motives  of   Private  as  Against   PuhHc 

Enterprises _ 

Government  and  Municipal  Trading  Operations 16 


BOOK   II 
Financial  Results  ok  Government  and  Municipal  Ownership 

I.     Bookkeeping  in  State  and  Municipal  Trading  Enter- 

Pri.ses 

II.     The  Belgian  State  Railroads '    '      .5 

III.  Prussian  Railroads __ 

IV.  State  Railways  of  Austria  and  Hungary 72 

V^     Italian  Railways 

VI.     The  Railways  of  the  Swiss  Federation 88 

VII.     Railways  of  New  Zealand q. 

VIII.     Government  Railroads  in  Fiance 105 

IX.     Public  vs.  Private  Operation j  jg 

X.     The  Holy  Cities  of  Municipal  Operation 125 

XI.     Operation  of  Gas  and  Electricity  in  the  United  King- 

''"'" 127 

XII.     Tramways  in  Great  Britain 135 

Xn  I.     Housing  of  the  Working  Classes  and  Public  Ownership 

in  Great  Britain , c, 

XIV.     Housing  of  the  Working  Classes  (Continued) i6i 


XV. 

XVI. 

XVII. 
XVIII. 

XIX. 
XX. 

XXI. 

XXII. 
XXIII. 

XX  i\-. 
XXV. 


COXTEXTS 

CiDvcrnment  Control  of  Forxl  Supplies lyc 

\'ictims  of  Government  Ownership jg, 

Charges,  Debts  and  Credits '  jg.. 

Fictitious  Profits 

Fiscal  Monopolies   

The  Alcohol  Monopoly  in  Switzerland  and  Ruisia.  . .  205 

Financial  Di.sorder.    .  ^,^ 
210 

I  he  F^irchase  Pnce , 

Delusions  of  Profit  and  the  Life  Insurance  Monopoly  ' 

'"  I'^^'y 243 

The  Fiscal  Mines  of  the  Saar  District 253 

Public  vs.  Private  Enterprises 256 


I. 
II. 

III. 

IV. 

V. 

VI. 

VII. 


BOOK   III 
Administrative  Results 

Administrative  Results 271 

The   Safety   of   Travellers   upon    State   and    Private 

Railway  Lines 

Disorders,  Delays  and  Errors [[  _'   280 

Official  Conservatism 

Labor 

The  Consumer '    „ 

Programs  of  Organization  and  Regulation 369 


BOOK   IV 
Political  and  Social  Conseqiences  of  Pi-blic  Operation 

I.     Socialist  Programs  and  the  Facts  ,«, 

IL     BlufT ■■' ^"' 

in.     Results  of  Experience !!§ 

I\'.     The  State  a  Dishonest  Man, . . .  \L 

v  .     Lorruption  .  . 

'  12  "1 

VT.     Nationalization  of  Public  Utilities  and  the  Foundation 

of  Great  Fortunes    

VII.     Disintegrating  Character  of  Public  Operation  .  ....     429 


WHERE  AND  WHY 
PUBLIC  OWNERSHIP  HAS   FAILED 


Where  and  Why  PubHc  Owner 
ship  Has  Failed 

BOOK    I 

PUBLIC  AND  PRIVATE  TRADING 
OPERATIONS 


CHAPTER  I 


TWO    PRECEPTS 


Neither  national  nor  local  governments  should 
attempt  that  which  can  be  done  by  individuals:  says 
the  economist. 

Labor  for  personal  profit  must  be  replaced  by  labor 
for  the  sake  of  serznce:  answers  the  Socialist. 

Experiments  in  the  way  of  nationahzation  and  mu- 
nicipahzation  of  public  utilities,  with  the  Socialist 
ideal  in  view,  have  been  sufficiently  numerous.  Do 
they  warrant  the  decision  that  nations  and  municipali- 
ties have  reaped  the  advantages  promised  by  their 
advocates?  This  question — primarily  a  psychologi- 
cal one — we  are  going  to  try  and  answer  in  the  fol- 
lowing pages. 


CHAPTER  II 


THE    THREE     MAINSPRINGS     OF     HUMAN     ACTION 

1.  Compulsion. — Bribery. — Instinct     for     Pcr.sonal     Cain. — 

Government   and   Municipal   Ownership   Would   Substi- 
tute the  First  Two  Influences  for  the  Third. 

2.  No  Dividends  on  Capital  of  Public  Undertakiiips. — Inter- 

est  and  .Amortization. — The   Altruism  of   Disinterested 
Managing  Boards. — Work  for  the.  Sake  of  Service. 

I.  Down  U)  the  present  time  there  have  been  only 
three  mainsprings  of  human  action — compulsion,  bri- 
bery and  instinct  for  personal  gain. 

Compulsion  is  the  true  basis  of  confiscation  and 
slave  labor.     Give  or  I  take.     Work  or  I  strike. 

Bribery,  in  the  nay  of  high  office,  rewards,  deco- 
rations, rank  and  homage,  helps  to  blind  us  to  the  pres- 
ence of  compulsion.  The  church,  the  schools,  and  the 
army  furnish  the  best  and  most  familiar  examples 
of  the  effect  of  thes?  two  forces,  which  governrnent 
and  municipal  ownership  would  substitute  for  the  in- 
centive of  personal  gain. 

Neither  compulsion  nor  bribery,  however,  has 
proved  quite  sufficient  to  induce  continuous  action  on 
the  part  of  einployees  and  officials  entrusted  with  the 
operation  of  national  and  municipal  services,  for  they 
are  utterly  incompatible  with  any  form  of  contract. 
The  very  nature  of  a  contract  requires  free  assent  to 


THK    THKKK  MArXSI'RIN'CS    OK    Ifl'MXN     ACTtON 

ith  terms  oil  hotli  sides.       There  fore,  tlie   third    force, 
the  instinct  for  personal  j,'ain,  is  invoked. 

Personal  j^ain  does  imply  a  preliminary  agreement 
—assent  on  the  part  of  him  who  offers  his  services  as 
well  as  of  him  who  is  to  pay  for  them,  livery  group 
of  empl(;yees  at  the  present  day  is  working,  not  for  the 
.sake  of  service,  but  for  gain. 

2.  Is  the  management  of  a  national  or  municipal 
undertaking  more  economical  than  the  management  of 
a  private  enterprise?  "Yes,"  answers  the  Socialist, 
'  hecau.se  no  dividend  need  be  paid  on  capital." 

But  there  arc  interest  and  anicjrtization  to  provide 
for  on  capital.  Consequently  the  margin  of  economy 
IS  only  the  difference  between  interest  and  amortiza- 
tion, which  public  undertakings  must  provide,  and 
di\  idends  which  the  capital  of  private  enterprises  must 
have. 

"The  high-salaried  employees  are  paid  less  by  pub- 
lic than  by  private  enterpri.se.  and  there  are  no  boards 
of  financially  interested  directors."  continues  the 
Socialist. 

This  is  possible,  but  the  salaries  of  ministers, 
burgomasters  and  mayors  are  high ;  though  these  high 
salaries  come  from  the  exerci.se  of  several  different 
functions.  It  is  probable  that  high-salaried  govern- 
ment employees  are  paid  less  than  their  colleagues 
of  the  same  relative  rank  m  the  employ  of  pri- 
vate industry;  but.  in  general,  the  personnel  of 
public  undertakings  is  more  numerous  and  the  ex- 
l)enses,  therefore,  amount  to  more  in  the  long 
run.    The  management  of  the  Western  (government) 


A 


wiii.ui;  AM)  wiiv   I'lULU   ()Wm:i<>iiii'   has  iaii.i;i) 


railwaw  ni  I'ram-c,  fnr  c.\aiii])lc.  ha.-,  t'stal)li^lu(l  ^i\- 
ti'cii  (lircctm^liips  in  plan'  ol  tlii.-  tlircr  (Icpartnicnlal 
divisions  ntstmnary  in  the-  rax.-  of  private  railways. 
There  are  no  linancially  interested  hoar(^^  of  directors, 
hut  it  i>  a  (|ueslion  whether  the  altrui>ni  of  the  eoun- 
e:Is  whieli  (hrect  and  control  national  or  niunieipal 
uudertakinj;-,  is  of  greater  advanta,i,'e  to  these  enter- 
prises than  personal  interest   would  he. 

in  eh'eet  the  partisans  of  puhlic  operation  tiiid 
economy  in  the  non-remuneration  of  capital,  outride 
of  interest  and  amortization,  and  in  the  meaner  renin- 
neration  of  promoters,  directors,  councillors,  and  the 
chief  managers  of  the  enterprise. 


CHAPTER    HI 


nFTF.RMrNING    MOFIVFS   OF   PRIVATF   AS    AGAINST 
PUBLIC    HNTKRPRISFS  -^^^'^^l 

'.   Why    Do    I,ulivi,luals    Rstahl.sh   an    Undertaking? 

^.    I    e  Mo.u..  o     Pol..ician,s.-Sacrifico  of  ,h.    Service  to 

I  -M.nal    l.ncls.-The    Roof  .,f    the    I.ouvre.-The    De- 

Pirtment  of   I-uie  Arts    (  Heaux  Arts). 
^■    I  lie   Ireycinet    Proi,'ram. 

4-  Municipal    Interests.— Pnhlic  OflFicials 

5-  I'rruiu,    /).;;,,;<  ra/u,;- Appeal    to    Party    Passions.-Pur- 

chase  of  the  Raihvays.-The  Purchase  of  the  West- 
ern  i.ine.--Socialization  a  Political  Necessity 
^'-  I'-'.ancal  Amis  a.ul  hypocritical  Kxcnses.-lpretexts 
a.H  leaht.es.-I-he  Alcohol  Monopoly  in  SvyitzerS 
and  Potatoes.  The  Alcohol  Monopoly  i„  Russia,  Tem- 
perance and  Fiscal  Laws.  »    •  "n 


I. 

trial 
that 
the  ; 
pure 

It- 
prise 


\vi 


lillltV 


When  one  or  more  individuals  invest  their  en- 
.  their  knowledge,  and  their  capital  in  an  indus- 
enterpnse   they   must   he   convinced   beforehand 
in  so  dom-  they  are  responding  to  a  demand  on 
•art  oi  a  ,i,mjui)  of  consumers  Iiaving  a  sufficient 
liasing  pcnver  to  repay  them  for  their  services,  as 
as  for  the  products  which   will  he  ofTered. 
the  estimates  of  the  fomiders  of  such  an  enter- 
are   correct,    they    will   gain;    if    incorrect     they 
I--_e.      In  either  case  they  will  hear  the  re.sponsi- 
fc^r  their  acts.     Gain  or  loss  is  the  inevitable 

5 


WHERE   AND   WHY    PUBLIC   OWNERSHIP    HAS    FAILED 

and  infallible  consequence  of  every  such  enterprise. 
And,  as  every  man  who  is  on  the  point  of  engaging 
in  business  knows  that  one  of  them  must  occur,  his 
energy  is  spurred  on  by  the  hope  of  the  one,  while 
at  the  same  time  it  is  being  curbed  by  the  fear  of  the 
other. 

The  industrial  and  commercial  progress  of  all 
nations  far  advanced  along  the  pathway  of  evolution 
proves  that  the  majority  of  those  individuals  or 
groups  of  individuals  who  have  engaged  in  business 
undertakings  have  calculated  accurately. 

2.  Statesmen  at  the  head  of  nations  or  municipali- 
ties are  not  necessarily  r  ponsive  to  the  conditions 
just  described.  The  undertakings  in  which  they  in- 
volve the  state  or  the  municipality  will  not  yield  them 
any  personal  profit  in  case  they  succeed,  nor  will  they 
be  called  upon  to  suffer  any  loss  if  they  fail.  The  in- 
evitable and  infallible  criterion  of  the  business  man  is 
lacking  in  their  case.  By  what  test,  then,  are  their 
motives  to  be  c  )nstrr.ed? 

As  a  rule  their  action  is  determined  by  the  amount 
of  personal  advantage  resulting  for  themselves;  not. 
it  is  true,  in  the  form  of  gain,  but  in  the  form  of  an 
increase  in  the  duration  or  extent  of  their  power. 
Tliey  establish  such  or  su.h  an  enterprise,  because,  in 
looking  about  for  some  bait  Hkeiy  to  attract  the  pub- 
lic, they  have  found  this  particular  one.  Does  the 
enterprise  fill  a  long- felt  want?  That  is  a  secondary 
(|uestion.  The  first  consideration  is  what  will  make 
the  broadest  appeal  to  the  pc^pular  prejudices  and  sym- 
pathies of  the  moment.     I  have  heard  ministers  and 


1 


MOTIVES  OF   PRIVATE  AS  AGAINST   PUBLIC   ENTERPRISES 

deputies  say:     "There  is  nothing  to  do.  but  we  must 
do  something." 

Now  expenditures  which  have  a  certain  audacity 
about  them  are  sure  to  be  accepted  with  a  much  bf^tter 
f^race  than  those  which  do  not  api>eal  to  the  imagina- 
tion of  the  pubhc. 

As  an  instance  in  point,  let  me  quote  from  my  own 
experience. 

When  I  became  minister  of  Pubhc  Works  I  speedily 
discovered  that  the  government  buildings  under  the 
jurisdiction  of  my  department  were  being  very  badly 
kept  up  by  the  department  of  fine  arts  (  Beaux  Arts). 
Knowing  by  personal  experience  the  importance  of 
roofs  I  turned  my  attentior  first  to  them.  In  the  case 
of  the  Louvre,  to  cjuote  but  a  single  example,  the 
water  leaking  through  the  roofs  was  cracking  the 
walls.  Moreover,  not  one  of  the  seventeen  lightning 
rods  attached  to  the  building  was  in  working  condi- 
tion, while  the  majority  of  them  were  so  insecure  that 
they  were  liable  to  fall  at  any  moment  on  the  heads 
of  passers-by.  I  used  the  entire  appropriation  at  my 
dispo.sal  to  insure  an  efficient  roofing  of  the  buildings 
entrusted  to  my  care.     The  rest  could  wait. 

But,  from  the  point  of  view  of  popularity,  I  had 
made,  as  I  had  foreseen,  a  wretched  move.  That  form 
of  Mattery  which  consists  in  the  sacrifice  of  one's 
own  to  public  opinion  forms  part  of  the  very  stock  in 
trade  of  the  politician;  and,  if  he  is  shrewd,  he  will 
not  hesitate  to  make  the  sacrifice. 

Again,  in  1902  the  French  Parliament  passed  a  law 
on  public  hygiene,  imder  which  'Municipalities  are  re- 
qmred  to  furnish  drinking  water  and  sewerage  sys- 


WHERE    AND    WilV    PUBLIC    OWNEKSIIII'    HAS    FAILED 

tenis.  A  nunihcr  of  deputies  and  senatfirs  wIki  had 
voted  for  the  hill  hastened  immediately  to  the  minis- 
ter of  the  interior  to  demand  that  the  law  should  not 
be  applied  to  the  municipalities  in  their  particular  dis- 
tricts.    And  so  it  s^oes. 

The  ft)ll()\vinj,^  illustrates  a  different  hut  ecjually 
dant,aTous  tendencv : 

Certain  uflicials  of  the  lieaux  Arts  are  provided 
with  funds  lor  the  purpose  of  p]r<-'n!,^  orders  or  for 
tlie  purchasing  of  works  of  art  at  tiie  salons.  These 
men  are  heset  hy  recommendatio!  and  advice  of  all 
sorts.  Concentration  oi  their  appropriations  upon 
one  important  work  is  out  of  the  (piestion ;  thev  must 
fritter  them  away  in  small  amounts.  Ijecause  there  are 
So  many  people  to  satisfy.  In  all  ])urchases  of  art 
works  there  is,  of  course,  a  large  proportion  of  mis- 
takes, which  will  he  accounted  in  the  future  as  dead 
losses;  but  it  is  not  necessary  to  begin  by  buying  fail- 
ures, as  so  frequently  happens. 

Nor  does  this  criticism  refer  solely  to  contemporary 
officials.  Ministers  and  undcr-secretaries  of  state  of 
other  periods  than  our  own  were  e(|ually  human. 
Side  by  side  with  the  Thomi  Thierry  art  collection 
in  the  Louvre  are  to  be  found  government  purchases 
of  works  by  the  same  artists,  made  at  the  same  time, 
'i'he  degree  of  taste  shown  in  the  ch(jice  of  the  ])ic- 
tures  included  in  the  Thierry  collection  is  far  superior 
to  that  sh-own  in  the  otticial  collection. 


3.  In  1879  Charles  de  IT'cycinet  prepared  his  grand 
program  of  public  work^.  There  is  no  more  agn-'able 
pastime  than  to  prepare  a  program  of  public  works. 

8 


1 


MOTIVES  OF   rRlX.vTF,  AS  AGAINST   TUULIC   ENTERPRISES 


4 


Hope  is  inspired,  delusions  encouraged,  and  we  can 
lca\e  to  our  successors  the  trouble  of  realizing  them. 
All  succee<lnig  niii  aters  oi  Public  Works  have  Ix-en 
li(|ui(latorb  of  the  Freycinet  program.  The  spirit 
which  dictated  it  struck  the  public  imagination.  "The 
government,"  it  was  said,  with  the  hearty  applause 
of  the  I'rench  Parliament,  "must  assume  charge  of 
the  national  savings."  As  if  there  were  any  savings 
except  those  of  individuals,  and  as  if  tliose  who  had 
known  how  to  accumulate  them  would  not  be  mc^re 
careful  to  use  them  to  good  purpose  than  those  who 
had  had  no  interest  in  their  actjuisition !  All  the  depu- 
ties and  senators  demanded  a  share  cf  the  cake  for 
their  ct)nstituents.  M.  de  PTeycinet  yielded  every- 
thing:, encouraged  still  further  demands,  and  retjuested 
engineers  to  sui)mit  plans  for  railways,  canals,  or 
ports.  The  government  concentrated  all  its  energies 
on  carrying  out  his  program. 

In  11^83,  however,  and  as  a  result  of  all  this,  the 
nation  v^ouid  have  been  bankrupt  if  ^L  Raynal  had 
not  closed  certain  contracts  with  the  railway  com- 
panies; contracts  which  Camille  Pelletan  later  de- 
scribed as  infamous.  But  he  has  never  explained  what 
the  government  would  have  done  if  the  contracts  had 
not  been  signed. 

4.  A  so-called  movement  of  public  opinion  fre- 
(jueutly  rewards  intensive  study.  Any  day  you  may  be 
suddenly  aroused  to  the  consciousness  that  there  is  a 
UKivement  on  foot  in  favor  of  a  certain  public  under- 
taking. On  the  side  you  are  informed  that  so  and 
so  and  so  and  so  (Ujcal  politicians)  have  made  large 

9 


WHERE   AND    WIIV    PUBLIC    OWNERSHIP    HAS    FAILED 

speculations  in  view  of  precisely  this  project.  The 
municipality,  for  its  part,  may  placidly  obey  the  hid- 
den impulse.  If  not,  the  parties  interested  proceed  to 
take  a  more  or  less  direct  part  in  the  struggle.  In  any 
event  the  sim])le,  hoodwinked  people  become  very  en- 
thusiastic for  or  against  the  issue. 

In  190J  the  City  of  Birmingham  decided  to  submit 
a  bill  to  Parliament  which  would  permit  it  to  take 
over  and  operate  its  urban  tramway  system.  A  refer- 
endum vote  was  taken.  Out  of  102,712  registered 
electors,  only  15,742.  or  15  per  cent,  of  the  total  elec- 
torate, voted.  Moreover,  according  to  the  Daily 
News,  "high  officia'  '  the  town  led  gangs  of  munici- 
pal workmen  to  tin  ^.o.l ."  ^  Major  Leonard  Darwin 
says  in  this  connection : 

"The  more  energetic  and  able  they  (the  officials) 
are,  the  more  likely  will  they  be  to  view  with  favor 
new  projects  connected  with  municipal  trade."  ^  In 
the  end,  perhaps,  such  an  extension  of  the  ofificial 
functions  will  mean  more  work  for  such  enthusiasts. 
But  their  influence  will  probably  be  greater,  and  con- 
ceivably even  doubled,  through  the  resulting  increase 
in  their  financial  importance. 


5.  The  promotors  and  leaders  of  movements  in  the 
direction  of  government  and  municipal  ownership  fre- 
quently resort  to  exciting  and  exploiting  the  so-called 
invidia  dcDtocratica,  or  democratic  jealousy,  one  of 
the  plagues  of  the  Roman  Republic,  and  always  in 

'  Raymond  Hovcr.it,  Ic  Snrialismc  Municipal  en  Angleterre  ct 
scs   iW'sultats   hiaajicicrs,  j).  444. 
'  Municif'al  I'radc. 

10 


MOTIVES  OF  PRIVATE  AS  AGAINST  PUBLIC  ENTERPRISES 


evidence  in  an  individualistic  state.  Men  who  are 
at  the  head  nf  private  enterprises  are  denounced  as 
exploiting  their  fellow-citizens.  Their  profits — 
usually  exaggerated — are  ([ucjted,  and  the  clairri  is 
made  that  such  moneys  will  be  restored  to  the  people 
when  governments,  local  or  national,  provide  every- 
thing and  individuals  nothing. 

Was  the  object  of  the  purchase  of  the  Western 
railway  in  France  economy  in  expenditure  and  im- 
provement in  transportation  facilities?  Not  one  of 
those  who  demanded  and  voted  for  it  dared  to  make 
such  a  claim.  With  the  lines  belonging  to  the  state 
the  deputies  would  have  places  for  their  constituents, 
a  certain  right  of  political  interference  in  the  adminis- 
tration, and  hence  a  large  degree  of  electoral  intluence. 
Resolutions  favoring  the  purchase  of  the  Western 
railway  had  been  rife  since  1902,  but  no  minister  of 
Public  Works  had  endorsed  them.  Immediately  after 
the  elections  of  1906,  however,  Georges  Clemenceau, 
then  Minister  of  the  Interior,  started  on  a  hunt  for  a 
program  which  would  be  Socialist  without  being  col- 
lectivist.  Socialism  is  the  present  phase  of  the  move- 
ment; collectivism  is  the  Socialist's  dream. 

Clemenceau  took  from  his  predecessors:  i.  Noon- 
day rest.  2.  Limitation  of  working  hours  and  a  col- 
lective labor  contract.  3.  The  income  tax.  4.  Labor 
pensions. 

But  he  was  also  anxious,  by  socializing  something, 
to  conciliate  the  Socialists  and  the  Radical  Socialists. 
He  therefore  selected  the  purchase  of  the  Western 
railway  as  suited  to  his  purpose.  Then,  in  order  to 
be  certain  that  the  affair  would  go  through,  he  impli- 

TI 


WIIERi:    AN'I)    WHY    I'lliLIC    ()\V  .\  KRSl  I  1 1'    HAS    FAILED 

catfd  Lniiis  I'.arlliou  in  the  affair,  in  the  latlcr"^  ca- 
pacity (»l"  niinislcr  of  ruhnc  Works,  aUhoui^^h  Bar- 
thou"^  antccctlcnls  did  not  point  'o  him  as  especially 
luted  to  c;.rrv  (jut  such  a  nieasurc. 


6.  One  of  the  chief  incentives  to  the  estahlishment 
of  a  i^overnnient  monopoly  is  the  hcjpe  (^f  procuriii_i,r 
resources  without  the  stigma  of  an  ap])arent  fiscal 
ohject  attaclied.  It  is  one  way  of  making  the  tax- 
payers pay  taxes  without  perceiving  that  they  are 
taxes.  As  a  matter  of  fact  they  are  simply  misre[)re- 
sented  taxes.  Appeals  of  their  promoters  to  the  moral 
and  hygienic  interests  of  the  nation,  in  order  to  effect 
the  desired  ohject,  are  e(|ually  disingenuous. 

For  example,  the  alcohol  monopoly  in  Switzer- 
land was  su!)miltc<l  to  the  ])ef)ple  as  designed  to  coni- 
liat  alcoholism,  while  puttiiig  an  end  to  the  ohmgcld 
duties,  a  sort  of  internal  revenue  duty.  As  for  alco- 
holism, the  financial  history  of  the  individual  cantf)ns, 
which  have  been  receiving  their  share  of  the  profits 
of  the  monojioly  for  the  purpose  ol  fighting  it,  proves 
just  how  relative  has  been  the  attention  devoted  to 
the  eradication  of  that  particular  evil. 

P)Ut  there  was  still  another  motive,  although  it  has 
been  mentioned  only  in  C(mversation.  In  Switzerland 
every  rpiart  of  alcohol  is  produced  from  potatoes. 
Growers  found  that  the  distillers  were  buying  their 
potatoes  too  cheaply.  Therefore,  at  the  opportune 
moment,  the  Inderal  gcjvernment  increased  the  pur- 
chase price  of  domestic  alcohol,  saying  to  the  potato 
grower:  "^'ou  see.  we  have  increased  the  price  of 
alc(^hol.     Whereas,  in  Austria,  alcohol  costs  20  or  30 

13 


1 


MOTIVKS  or    IMUVATK   AS   AGAIN^       IMmMC   KXTKRl'RISES 

trams,  \vf  in  Switzerland  ])ay  more  than  80  francs 
fnr  it;  and  \vc  arc  doini,'  so  in  (irdcr  lliat  y<n\  can 
s^Il  your  potatoes  at  a  i^ood  jjrice.  In  other  words  we 
are  L^rantinj^  \'ou  a.  subsidy." 

When  the  monopoly  of  alcohol  was  CNiablished  in 
Ausr-ia  it  was  repeated  in  every  key  tha'.  the  object  in 
\iew  was  moral  and  not  linancial.  It  was  e>tal>!i-hed. 
in  the  tirst  place,  in  c)rder  to  ensnre  to  the  nioiijik 
(peasant)  absolutely  pure  alcohol.  Emphasis  was 
placed  on  the  characteristic  retail  shops  of  the  ^ov- 
ernment.  kept  bv  ofticials  who  can  have  no  interest  in 
increasini,^  consumption.  There  is  neither  chair,  cork- 
screw, nor  glass  in  the  shop;  therefore,  the  tnonjik, 
after  buying,  must  go  elsewhere  to  drink. 

Hnt.  in  1912,  the  recei])ts  from  the  monopoly  on 
alcohol  were  estimated  at  ;r)3,Q90,ooo  rrnibles,  out  of 
a  total  income  of  j, 896,000,000  roubles,  or  26  per  cent, 
it  i<.  therefore,  easily  surmised  that  ofticials  charged 
with  the  sale  of  alcnhol  would  be  held  to  a  strict  ac- 
count if  de\()lion  to  the  temj)erancc  cause  should  hap- 
pen to  bring  about  a  deficit  in  the  budget.  The  moral 
a-^pect  of  the  monopoly  is  completely  effaced  l)y  fiscal 
interest. 

M.  .\ugugneur  heads  a  local  and  national  owncr- 
shi])  party.  Why  should  he  advocate  public  owner- 
ship? Sim])ly  in  order  to  have  a  platform — a  reasoTi 
for  i)arty  existence.  The  future  of  municipal  or  gov- 
ernment undertakings  is  a  secondary  matter.  What  is 
necessary  is  an  issue  which  will  lead  to  iwlitical  action 
and  to  immediate  ])ower. 

If  any  enterprise  inaugurated  by  a  mayor  or  by  a 


VVIIF.RE   AND    WHY    PUBLIC    OWNERSHIP    HAS    FAILED 

minister  is  difficult  and  useless  neither  the  mayor,  the 
minister,  the  municipal  councillors,  the  deputies,  nor 
the  senators  who  have  hrought  it  into  being  will  be 
called  upon  to  bear  any  material  responsibility  for  it. 
The  taxpayers  of  to-day  and  to-morrow  must  assume 
the  entire  burden.  Sometimes  the  failure  of  an  un- 
dertaking involves  a  decrease  in  the  influence  of  the 
politicians  who  were  its  pron  •  Lers.  T>ut  frequently  it 
increases  their  importance  in  the  public  eye. 

The  risks  which  the  Preycinet  program  carried  with 
it ;  the  usclessness  of  a  quantity  of  the  work  included 
in  it ;  the  burdens  which  have  accrued  from  the  opera- 
ti<Mi  of  railroads;  an  excess  of  30  per  cent,  in  the  con- 
struction of  navigable  ways  which  are  not  yet  fin- 
ished, all  this  has  in  no  way  injured  the  prestige  of 
the  author  of  that  program.  The  advocates  of  the 
purchase  of  the  Western  line  are  coping  cheerfully 
with  the  deceptions  it  has  engendered,  and  they  imag- 
ine— and  rightly — that  no  one,  or  almost  no  one,  has 
ever  placed  in  parallel  columns  their  promises  and 
the  actual   facts. 

Again,  had  M.  Barthou  conducted  a  private  business 
after  the  fashion  in  which  he  carried  through  the  pur- 
chase of  the  Western  road,  he  would  long  since  have 
been  branded  as  a  defrauding  bankrupt.  As  a  public 
official  the  state  has  rewarded  him  for  his  efforts  in 
this  direction  with  the  premiership  of  France. 

Conclusions. 


I.  Any  private  undertaking  has  a  definite  objective 
point — gain;  and  a  ct'rtain  test — gain  or  loss. 


*4^ 


1 


M 


OTIVK.S  UK    I'RIVATK  AS   AGAINST    PUBLIC   ENTERPRISES 


2.  The  motive  behind  municipal  and  national  un- 
dertakings is  usually  pcjlitical  or  administrative  in- 
fluence for  their  promoters. 

3.  The  promoters  of  public  undertakings  escape  all 
material  and — generally — all  moral  penalty. 


i; 


CIlAPTF.R   TV 


GOVERNMENT    AXP     MrXICirAL     TRADIXG    OPERA- 
HUNS 

1.  The  Report  of  Gustave  Schclle  to  the  International  Sta- 

tistical  Institute.— List  of    l'iil)lie    Industrial  Operations. 
— Postal,     I'l'lei;!  aj)!!     ami     Telejihone     Svsleuis. —  Mints. 

2.  Pulilic     Tradmi;    Ijiterprises    of    Denmark.    Switzerland. 

Holland.     Italy,     l-"rancc,     Belgium,     Sweden,     Austria, 
Germany. 

3.  The  Unitetl  Kingdom  and  the  United  States. 

4.  The  London  County  t  ouncil. 

5.  The  Municipal  Activity  of  Russia. 

6.  New    Zealand. — Government    Socialism    More    Fully    De- 

veloped  rhan  in  Any  Other  Country. — Socialist  Enter- 
prises. 

7.  Nationalization  of  the  Soil  in   New  Zealand. 

8.  Government     and    Municipal    Trading    Operations     Re- 

stricted in  Scope. 

I.  When  zealots  in  the  cause  of  "a  transference  of 
trading-  and  commercial  nndertakins^s  to  pul)lic  bocHes" 
declare  that  it  i  general  and  irresistible  niovcnient, 
tliey  are  mistaking  their  hopes  for  an  accomplished 
fact.  l'iil)lic  tra(hng  enterpri>es  in  actual  existence  are 
relatively  few. 

Duritig  the  session  <if  tlic  International  Statistical 
In>titiile  of  i<jO(),  at  tlie  suggestion  of  MM.  Arthur 
RatYalovich   and   Gustave    Schelle,    a   coitimittce    was 


(,i'\  I  UN Ml.N  I      AM)     MINUirAI.      lK\l)l\(i     i  ilM.K  A  1  1(  )\S 

aiipdiiiti'*!  fur  tlu-  piirjKisc  of  collect iiijj;  statistics  rc- 
L;anliiij;  stale  and  iiiuiiicipal  tradiiit;  undertakings. 
The  nieinliers  of  tluN  emninittee  were:  \  ves  (iuyot. 
chairman:  (ui^tave  Sclulle,  secretary,  and  ?dM,  Cul- 
son,  Ralfal' i\i(  li.  I\'lhnr.  Xicolai  and  llennei|uin. 
The  rejiort  nf  tln>  cuinniittee  was  presented  to  the 
^essiiin  nf  ihc  hiUTnaliinial  Statistical  IiiNtitute  which 
met  at  The  1  hti^nc  ni   Kill. 

rile  industries  niouopoli/ed  hv  nations  or  cities  ap- 
|)car  in  the  ri'pdrt  a-^  tollou^:  Tlie  po>ial  s\>lenis  in 
every  cointtr\  and  uT.';,frai)hs  and  telcpliDnes  in  every 
couiUrs  except  the  Tnited  States.  .\11  ^osernnients 
coin  money,  eiiher  free,  a^  in  I'.n^land.  or  f"r  a  slii;ht 
charge.  In  the  fi  illow  iny;'  --unimary  we  will  not  S])eak 
of  these  four  utilities  unless  they  present  some  si)ecial 
characteristic  peculiar  tu  the  country  under  consid- 
eration. 


2.  The  report  begins  with  Denmark.  It  is  gener- 
ally known  that  this  country  is  very  active  and  very 
highly  developed  industrially.  Its  population,  how- 
ever, is  smaller  than  that  of  the  city  of  Paris. 

Denmark  operates,  in  connection  with  its  ami}-, 
twenty  public  enterprises,  employing  altogether  2.335 
people.  The  railway  system  comprehends  37  enter- 
prises, enijiloying  4,797  people.  In  addition  to  these 
there  are  16  other  enterprises,  employing  279  peojile. 
and  including  a  dressmaking  establishment  and  a  vvork- 
diop  attached   to   the   royal   theater. 

The  total  number  of  these  enterprises  is  thus  yj{. 
emi)loying  7.41  I  people,  of  whom  7,i''i6  are  laborers. 
But  the   majority   of   Danish   state   undertakings    are 

17 


VVllhKI',    AND    WHY    I'lltl.h     OU    >  !■  K>l  1  1 1'     IIA>    1  All.KI) 


(.Illy  ^cnii-puhlic  in  character.  The  |)rincii)al  ohjcct  of 
the  factory  at  l^scnul  is  the  manufacture  ol  dotli 
for  the  Anuy  and  N'avy.  htit  it  ha>  a  retail  shoj* 
for  the  henrlit  «-f  the  puhhc.  I  lie  ixiwiier  null  ol 
l-Vederiksviirk  lia>  a  iiioiKiixily  of  the  iiumufacture 
(if  powder  'liie  three  ports  (if  llelsiii.i^or,  I'Vederiks- 
havn.  and  I'.shjeri;  are  the  thrtt.-  i,'reat  jiorts  of  ih.e 
state.  I  he  royal  manufacture  of  porcelain  is  not 
counted  anionj;  j^overiinient  indn^trii'S. 

As  for  the  to^'  'is  the  census  of  i«K>^i  L,Mves  43  water 
works,  1  street  ,  vint,'  enterprise.  _'  emhankmeiit  eii- 
terpri:.cs.  i  dred^itiK^  un<lertakinK^  _'  construction  un- 
dertakings with  _'()  workmen,  ?  shii)yar(l,  i  comhined 
gas  and  water  plant,  _'  niouldiiiL,^  undertakings,  i  in- 
stallation of  electrical  apparatus.  8  i)lants  for  the 
jjroduction  and  distrihution  of  electricity,  bo  gas 
works,  J  wrecking  enterprises,  and,  finally,  i  chimney 
sweep  and  i  machinist,  each  of  whom  is  considered  as 
a  munie.,..i!  enierpn.e.  Th."  tc;tal  is  ij6  enterprises, 
employing  J, -74  people,  <ir  an  average  of  18  persons 
each. 

In  Switzerland  the  state  alcohol  monopoly  buys  po- 
tato spirit  and  sells  it  again.  It  does  not  manufacture 
it.     The  state  hotli  owns  and  ojicrates  its  railways. 

In  Holland  the  state  publishes  an  ofticial  journal 
and  operates  the  Wilhelmina  and  lunma  pit  coal  mines. 
The  government  railways  are  operated  for  the  state 
by  a  private  company. 

For  Italy.  (Giovanni  Giolitti.  then  minister  of  the 
Interior,     had     already     furnished     statistics    of     the 

i6 


'•.OVIKNMK.N  r     AM)     Ml' N' 1 .1 1'AI.     TRAniNi;     OPFRATIONS 


3 
I 


principal  nuiiiic-ipal  tradiiii,'^  iiiultTtakin.Ljs  u|>  tn 
\i)()\,  iti  a  rcimrt  presented  tn  tlic  C'lianiher  of 
hcputics.  March  ii.  Kjoj.  Vhv  rtjJDrt  lists  171 
vlau^htcr  In  usc>.  151  water  works  ai'.d  artesian 
wells,  -'4  pl.ints  tor  iIr  production  of  electrical 
enerj^'v,  JO  public  laundries,  15  f^as  Wvjrks.  i  _»  rudcr- 
takinj,'  enterprises,  I  _'  public  hatlis.  4  ice  |)lants,  3 
vewat^e  disjxisal  plants,  3  irri.^.ition  enterprises,  _• 
bakeries,  J  pli,.rniacies,  and  a  few  other  le^s  important 
services.  The  railways  are  state-owned  and  |,erated. 
The  law  of  March  _»<),  i<)03,  eiuniierites  K)  enter- 
]irises  which  municipalities  mav  undertake.  ( )utside 
of  the  usual  services,  water,  i^as,  electricity,  etc., 
we  mii^ht  mention  pharmacies,  mill>  and  bakeries,  as 
"normal  ret^ulators"  of  prices,  ice  plants,  j)ublic  bill 
postini^,  drying  rooms  ami  store  houses  for  corn,  the 
s.ile  of  j^rain,  seeds,  plants,  vines  and  other  arljureal 
antl  fruit-bearing  i)lants. 

The  same  law  has  determined  the  manner  in  whicli 
local  governments  may  purchase  concessi(jns  previously 
granted  to  private  interests.  They  must  pay  to  the 
owners  an  ecpiitable  indemnity,  ruul  account  nuist  be 
taken  (a)  of  the  market  value  of  the  construction  and 
of  the  movable  and  immovable  ecjuipment;  (b)  of  the 
advances  or  subsidies  made  by  tiie  local  government , 
the  registration  ta.xes  paid  by  the  concessionaires;  and 
the  ta.x  that  tiie  companies  were  able  to  pay  to  the 
towns  on  excess  business;  (c)  of  the  profit  lost  to  the 
concessionaires  through  the  purchase,  based  on  the 
legal  interest  rate  for  the  number  of  years  which  the 
franchises  have  still       -un,  with  annual  sums  equal  to 


WHERE   AM)    W  IIV    IM   lil.U     OWNKKSIIIl'    HAS    FAILED 

the  average  pruiii^  <>t  the  five  years  last  passetl  (not 
inchuhng  interest  on  capital). 

The  law  ..t  April  4.  '9'^-  established  a  life  insur- 
ance nioiiiipolv. 

The  report' of  the  Congress  of  the  I'edcration  ot 
Municipal  Enterprises,  held  at  Verona.  May  -' i  and 
22,  U)\o.  enumerates  74  special  public  enterprises,  31 
of' which  were  in  existence  before  the  law  of  1903. 
This  would  tend  to  prove  that  the  law  had  not  aided 
greatly  in  their  further  development. 

France  has:  i.  Fiscal  monopolies,  such  as  matches, 
tobacco  and  powder.  2.  Postal  system.  3.  Covern- 
ment  railways,  comprising  the  system  bought  before 
the  Western  line;  the  Western  railway;  and  the  rad- 
way  from  Saint  C.eorges  de  Commiers  to  L.  A.  are.  111 
the  district  of  Isere,  the  operation  of  which  constitutes 
a  distinct  department  aside  fr.>m  that  of  the  (jther 
government  railways.  Little  is  known  concerning 
this  third  svsteni. 

Other  enterprises  are;  the  National  I'rinting  Office; 
the  official  journal  (Jounvil  OfficicI):  the  manufac- 
ture of  metals  and  coins;  the  manufacture  of  Sevres 
porcelain;  the  manufacture  of  Cobelin  tapestry;  the 
manufacture  of  Ik-auvais  tape.stry ;  the  wa  r  works 
of  Versailles  and  de  Marly;  stock  farms;  and  the 
baths  of  Aix-les-Bains. 


The  Citv  of  Paris  has  organized  several  commercial 
ventures.  In  i8<)0  a  muniemal  department  of  elec- 
tricity was  installed,  wluel;  was  abandoued  m  1007. 
The  city  has  also  taken  full  control,  since  June  i,  1910, 

20 


COVERNMENT    AND    MUNICI"Ai.    TRADINr.    OPERATIONS 


i 


of  till,  Iklk'villf  cable  railroad.  In  1905  it  nninicipal- 
izfd  the  umlertakirii^  service,  and  it  operates  a  stune 
(|uarry  lor  the  hcnetit  of  the  city  streets.  These  are 
the  only  directly  nianaj^cd  undertakings  of  the  City  of 
Paris.  A  mistake  was  made  in  becoming  a  share- 
holder in  a  gas  company.  In  the  case  of  water  the  city 
has  undertaken  to  construct  and  maintain  pumping 
stations  and  also  mains,  but  it  has  granted  to  a  private 
company  the  right  to  construct  branch  ])ipe  connec- 
tions, to  receive  subscriptions  and  to  collect  rents. 

The  Munici])al  Council  of  Paris  has  leased  its  elec- 
trical sup])ly  down  to  1040  and  als'i  its  transportation 
facilities,  both,  surface  and  underground. 


:vres 
the 

orks 
the 


Pjclgiuni  o\vn>  and  ojierales  nearly  all  its  railways. 
It  runs  steamer-  f ri  in  Ostend  tt)  Dover,  and  on  the 
cmal   troiii  Ainers  to  the  i)ort  of  ['landers. 

In  Sweden  the  state  owns  and  operates  the  rail- 
ways. 

In  Austria,  according  to  a  work  compiled  under 
the  supervision  of  J.  d.  Griiber,  by  Doctor  Rudolph 
Riemer,  secretary  of  the  Central  Pureau  of  Statistics, 
outside  of  the  customary  monopolies  the  state  controls 
fiscal  monopolies,  such  as  tobacco,  salt,  powder,  lot- 
teries, r.'iilw.'iys.  a  national  printing  office,  an  official 
journal,  docks,  stock  farms,  t  :si>,  and  other  public 
lands  and  mines. 

Municipalities  which  V. .  Schelle  has  not  listed  oper- 
ate g  IS  and  electric  i)lants.  underlaki;ig  services,  bath^, 
p.'iw  ushops,     horticultural     establishments,      slaughter 


m 


WHERE   AND   WHY    PUBMC   OWNERSHIP    H  ■>  S   FAILED 

houses,  savings  banks,  theaters,  docks,  hydro-electric 
works,  race  tracks,  tramways,  and  daily  newspapers. 

Ir  regard  to  Germany  M.  Schelle  had  received  no 
information  concerning  the  German  railways,  nor  the 
fiscal  mines  of  Prussia.  The  government  operates 
coal  mines  in  upper  Silesia,  the  districts  of  Deister  and 
Oberkirdien.  in  Westphalia,  and  in  the  district  of 
La  Saar.  These  mines  were  employing  91,671  work- 
ers in  1910.^ 

The  Prussian  government  also  produces  lignite, 
amber,  iron  ore  and  other  ores,  both  calcareous  and 
gypsum,  potash,  rock  salt  and  refined  salt,  and  oper- 
ates blast  furnaces  and  foundries  of  metals  other  than 
iron.  These  various  industries  employ  12,759  work- 
ers, which  makes  for  the  two  classes  enumerated  a 
total  of  104,430  persons  employed.  The  state  also 
operates  the  Prussian  bank.- 

3.  The  report  does  not  take  up  the  public  under- 
takings of  the  United  Kingdom,  or  of  the  United 
States.  The  results  of  the  investigation  niade  by  The 
National  Civic  Federation  of  America,  for  the  pur- 
pose of  discovering  whether  the  attempts  at  tnunici- 
palization  made  in  Great  Britain  ought  to  be  imitated 
in  the  United  States,  were  published  in  1907  (3  vol- 
umes). However,  the  information  given  is  most  in- 
complete. 

In  Great  Britain  the  telephone  was  not  taken  over 

'See  Circulairc  du  Comitc  des  Houillcres,  February   :.o.   igi3- 
"Arthur  RafTalovich  in  Journal  dcs  £cunumtstes,  October,  1912. 

22 


GOVF.RNMKNT     AND     MUNICIPAL    TRADING     OPKRATION? 

I)y  the  state  until  1912.  In  the  United  States  the 
telegraph  and  telephone  are  still  under  private  man- 
agement. 

The  Postmaster-Ciencral  of  the  I'nitcd  States,  in  his 
report  of  19 IJ.  recommended  the  annexation  of  the 
telegraph  service.  But  President  Taft,  in  transmitting 
liie  recommendation  to  Congress,  declared  that  he  by 
no  means  favored  the  suggestion.^ 

However  the  President  complimented  the  Post- 
iiiaster-General  with  having  brought  about  economy 
in  his  department.  But,  as  the  Journal  of  Commerce 
()I)served.  to  bring  about  economy  in  a  government 
department,  and  to  ensure  an  economic  administration 
of  a  trading  enterprise,  are  two  very  different  things. 

In  the  British  Isles  municipal  enterprises  have  been 
multiplied,  following  the  Public  Health  Act  of  1875. 
which  act  granted  to  sanitary  districts  authority  to 
establish  water  and  gas  works,  and  the  Municipal  Cor- 
porations Act  of  1882.  which  codifu  .  the  municipal 
law.  This  latter  act  gives  to  municipalities  the  right 
to  spend  their  income;  but,  in  order  to  contract  loans 
and  make  purchases  or  sales  of  land,  they  must  obtain 
permission  through  the  medium  of  private  acts  of 
Parliament. 

The  industrial  undertakings  of  British  towns  are 
much  less  important  than  might  be  supposed  from 
the  rhapsodies  they  inspire  in  government  ownership 
fanatics.  In  proof  of  this  statement  it  is  sufficient  to 
enumerate  the  industrial  operations  of  the  London 
County  Council. 


Journal  of  Commerce,  New  York,  February  24,  1912. 

23 


\vhi:ki: 


WHY    I'UBI-U"   OVVNKRSIIIP    HAS    FAILED 


4.  The  London  County  C"<unuil  was  cstablislu'd  in 
188S.  I'roni  iS<S8  to  1894  and  from  1898  to  1906  it 
callfd  itself  progressive.  Its  progress  consisted  chielly 
in  seizing,  by  right  d'  its  own  authority  the  greatest 
possible  number  ',{  pulilic  utililies.  ibiwever.  the 
distribution  of  the  Londnn  water  supply  is  not  cm- 
trolled  by  the  Council,  despite  all  its  efforts  to  obtain 
such  control.  The  control  of  water  was  given  b\-  the 
law  of  looj  to  the  Metropolitan  Water  I'oard,  com- 
posed <if  ()(')  representatives  of  the  \arious  local 
authorities  comprised  within  the  area  of  distribution, 
which  is  not  U>s  than  ^^^j  Mpiare  miK-s.  or  s  times  that 
of  London.  The  I'.oard  has  the  rii^lit  to  levy  ta.xes. 
and  it  has  ac(|uired.  by  pri\ate  contract  and  without 
opposition,  the  holdings  <jf  8  ci'iupaiiies  for  a  total  of 
about  £i.<)Oo.ooo  ($0,253,000).  It  has  spent  one 
millioti  and  a  half  pounds  sterling  ( .'•^7, 305, 000)  in 
luiblic  works.  In  i')04  it  furn'shed  81, 823, 000, 000 
gallons  of  water  to  7.000.000  people,  or  32  gallons  a 
day  per  capita.  53  per  cent,  (d'  which  conies  from 
the  Thames.  _'5  per  cent,  from  the  river  Lea,  and  2_' 
per  cent,   from  '^])rings  .and  wells. 

The  London  dorks  were  constructed  bv  private 
cnm])an!es.  In  1007  the  government  introduced  a  bill 
to  take  over  thc^e  enteri)rises  from  the  companies, 
which  received  an  indemnity  of  £_'2, 368,016 
($108,936,000)  from  the  Port  n\  London  Thi<  lat- 
ter corporation,  ])resifled  over  bv  Lord  Devoniiort. 
who  showed  himself  so  eneri^etic  in  the  strike  oi  the 
dock  laborers,  is  composed  <if  thirtv  members,  ap- 
pointed by  the  go\ernmetU,  by  the  municipal  authori- 
ties and  bv  individual  merchants.     The  Port  of  Lon- 

24 


GOVFRN.MF.NT     ANT)     MI'XICirAr.     TKAniXG     OrERATIOXS 


4 


(Inii  is  Ml  independent  (^f  the  Londmi  C'<  unity  Conncil 
that  thi'  Iritler  refused  to  i^uarruitee  the  loans  that  the 
fcinner  wa--  forced  to  contract  in  order  to  |>ay  the 
inr)einnit\   to  ilic  dock  companies. 

Xeither  doc->  the  London  Connty  Conncil  furnish 
tras  to  the  inhahilants  of  Lond'-n.  The  companies 
nianufactnrin^^  ,i;as  were  organized  hy  pri\ate  capital. 
In  18;:;  there  were  20  of  these,  hut  hv  1^60  the  num- 


ber had  been  reduced  to  13.  Sul)se(|uently  there  were 
several  mergers,  which  necessitated  private  hills.  Thus 
a  way  was  openeil  for  an  inter\ention  which  estab- 
ed  a  scale  of  dividends  proporli'  ned  to  the  price  of 
The  dividend  rate  was  fixed  at  4  |)er  cent.      If 


lish 
"as. 


n 


there  is  a  decrease  in  the  price  of  gas  the  dividend  ca 
be  increased  is  5(1  {  34  cents)  for  each  penny  of  the  de- 


i\ed   at    ^s   Jd    (76 
lit 


crease  in   price,   which  was  then 

cents)  for  1,000  cubic  feet  of  gas  of  14  candle-power 
If  there  is  an  increase  in  the  price  the  dividend  is 
bed  in  the  same  proportion.  London  is  lighted 
anies.  One  company  sells  its  gas  at  a 
ts).     The  London  C'ounty  Coun- 


liniiini 


bv  two  gas  com] 


rate  ot  2S 
cil  has  onl 


(^2  cen 


lie  ri: 


dil   of 


ti-xinsj 


the 


piahty. 


The  I-dectric  Lighting  .Act  of  i88j  provided  that 
local  govennnents  could  ])urchase.  at  the  end  of  21 
veats.  any  electrical  enteqirise  established  within  their 
territories.  The  law  of  1888  extended  the  })urch<isc 
period  to  the  end  of  42  years. 

Several  local  governments  of  London  have  estab- 
lished electrical  service  in  a  number  of  different 
ways.  In  16  out  of  2Q  of  the  local  districts 
there  are  municipal  'plants,  but  they  represent  a 
service  over  oidy  55>4   square  miles,  while  the  elec- 

25 


WHERE-:    AM)    UllV    IMIU.U     ( )U  .\  KKSI I  I  T    HAS    1  AII.ED 


trical  companies  supply  a  surface  of  64 K'  square 
miles.  Ill  s^aeatcr  Li  mdon  llic  tnunicipal  plants  sup- 
ply 167  scpiarc  nnles.  and  uj  companies  331  square 
miles. 

The  I.diuldn  (nunty  (  uuncil,  in  I'jOj.  planned  to 
create  an  electric  central  station  su])plyin.<,^  a  district 
of  451  s(juare  miles;  but,  when  the  "pn  i,s:ressive  ma- 
jority" of  the  London  County  Council  was  replaced 
by  a  "moderate  majority,"  the  i)lan  was  abandoned. 
Later  I'arliament  passed  a  bill,  demanded  by  8  out  of 
the  10  existiiii^  C()mi)anies.  pernnttinjj;  them  to  consoli- 
date their  systems.  lUit  the  London  County  Council 
will  still  have  the  right  to  buy  them  out,  in  193 1.  or  at 
the  end  of  any  subseciuent  ten-year  jjcriod. 

In  fact,  the  Council  has  exercised  its  authority  ac- 
tively only  in  {\^^.  (Hrection  of  operating  tramways. 
In  i8;o  the  Tramway  Act  authorized  a  local  govern- 
ment, or  any  private  cfjuijiany  which  had  obtained  its 
consent,  to  ask  for  a  private  bill  in  order  to  establish 
a  line.  The  Metropolitan  P>oard  ni  Works  of  London 
granted  several  companies  authority  to  establish  lines. 
In  1894  the  Council  demanded  the  right  to  purchase 
these.  In  1898  it  Ixjught  out  two  companies,  one 
of  which  possessecl  43  miles  of  tramway  lines  in 
the  north  of  London.  The  Council  left  to  the  com- 
pany the  right  of  operation  during  14  years. 
In  1898  the  operation  of  the  other  tramway  lines  was 
begun.  The  Council  bought  up  the  lease  of  the  other 
companies  in  1906.  It  has  now  136  miles  of  tramway 
lines,  and  its  receipts  are  diminishing. 

The  London  County  Council  likewise  attempted  to 

26 


I 


(;0\l  HXMKNT     AND     MUNRII'AL     TKADINr,    OPl.RATIONS 

iipcT.ilc.  lic,i;innin,L:  witli  \<)o(),  a  line  of  boats  on  the 
TliauK-'s.  riir  tirs!  two  years  tlie  undertaking  resulted 
in  a  deliiit  <<i  i()0/>S3  ( ^441  ,C)_'6  ).  'l"he  service  was 
ahaiKJnned  one  nr  uvo  years  later.  The  30  boats, 
wliidi  iia<i  ei  >t,  in  19c/),  £7.000  each,  were  sold  in  a 
Uil  tor  iiS._'04.  The  Council  also  took  upon 
it>elt  the  demolition  and  recc^nstruction  of  a  cer- 
tain number  of  cheap  hxlgings.  Tiierefore.  \  the 
wav  of  actual  munici]ial  indusirial  services,  i.  ,.s 
managed  a  boat  line  upon  the  Thames,  demolisned 
and  reconstructed  cheap  lodgings,  and  is  now  operat- 
ing tramways. 

I'he  partisans  of  public  operation  say,  none  the  less, 
that,  "in  nrincijjle,  municijial  ownership  has  been  ac- 
cepted.'" Only  those  who  are  honest  add  "but  public 
opinion  has  confined  it  within  very  narrow  limits." 
Moreover,  the  elections  of  1912  have  kept  the  progres- 
sives in  the  minority.* 

5.  According  to  an  article  in  the  Fortnightly  Rc- 
z'iczv,  of  January,  1905,  it  is  in  Russia  that  local  public 
ownership  and  operation  have  been  most  widely  ex- 
!(  ided.  The  sale  of  agricultural  implements,  medi- 
cines, magic  lanterns,  translations  of  Moliere  and  Mil- 
ton, the  expurgated  novels  of  Dostoiewski.  sewing 
machines  and  meat  are  among  Russian  public  enter- 
])rises.  It  is  said  also  that  it  is  useless  for  cities  to 
demand  subsidies  from  the  government.  The  stock 
answer  of  the  administration  to  all  requests  for  aid  is: 
MtinicipaU::c.     This  advice  is  easy  and  costs  nothing. 

'  Claude  W.  Mullins,  L'Activitc  Municipalc  dc  Londrcs,  Revue 
P.cnnomique  Internatioualc,  1910. 


wiiiKi-.    \.\i>  \\\\\    I'liM  ic  iiw.\M<-ii  ir    HAS 


All. HI) 


6.  (  )\\iur-hi|>  aiv'  ■  iniMtn 'P.  mi  i  natumal  scale 
have  Iiccii  iiii'-t  wilt  K'  iKveli  iped  in  New  Zealand. 
The  n  iii-iinui(  in  '<\  i^^-  ,iL;a\e  tn  le^i-tati>rs  ot  that 
I'liinilr}"  all  iHi>-ilik'  anth^nty  withnut  niher  restric- 
tinii  than  "t"  d"  nilhin^  reim^nanl  tn  tiie  h'.iii^dish 
law."  X"!"  arv  tlieir  pnwiT^  hunted,  as  in  the  I'nited 
States.  I)}'  a  •iti])reme  conrt. 

New  Zealand  i-;  i'-nlated.  It  has  im  c  nnpetitdrs.  It 
has  lariat  iinde\  eldped  re^nnrees.  It  has  a  territnry 
<>\  J7i..;o()  -<|nare  kilometers  (  104,344  s(|uare  miles), 
I  If  nil  ire  than  halt  that  of  h'rance,  and  a  poinilatinn 
11)  I, (141.0(H)  prdjilc,  nr  .]  inhabitant^  per  sipiare  kili>- 
metcr  (  to  inhahitant^  per  sipiare  nnle  I.  X'atnrally  tlie 
cxperinients  nf  a  restricted  popnlatimi.  distrihnted 
o\er  a  va^-l  area.  ha\e  nut  the  satne  impurtanee  as 
thi'-^e  attempted  hy  a  pi  ipnlatinti  id'  several  ficillion  iil- 
hahitant'-  ei  iticentrated   within  narmw  hnnndaries. 

In  a  wiirk  entitled  Statr  Sncialisiii  in  .Wti'  Zealand  ' 
Messrs.  Le  Rnssisiiiol  and  Stewart  sj;ive  us  a  cnmplete 
picture  of  the  Sociali>t  enterprises  which  have  been 
attempted  there. 

Most  of  the  soil  was  oric^inally  j.joveniinent  1;  id.  As 
we  shrdl  see  further  on,  tln'  ,y:overnnient  has  not  re- 
tained possession  of  it  for  the  purpose  of  exploit- 
iii.c:  it' 

The  real  development  of  governmental  activity  is 
chietly  due  to  the  energy  of  one  man,  Sir  Julius  Vo- 
gel.  .\t  his  instance  a  government  life  insurance  sys- 
tem was  established  in   iSr^).     Tn   1S70  he  outlined  a 

'Slate  Socialism  in  ,\  ezc  Zealand,  hy  James  Edward  Lc 
Rossipni'l,  Professor  of  Economics  in  tlic  University  of  Denver, 
and  William  Downie  Stewart.  Barrister  at  I. aw,  Diinedin,  New 
Zealand,   i   volume  in   i2mo,  George  C.   Harrop  2.   Co,   London. 


(,(i\  1  k.\.mi:nt   and    munu'II'Ai.   tk\i>i\(;   oriuArioxs 


\,i-l  pMliiA  111'  |iiil)lii-  wDfks,  i-.illinj;  tnr  an  ixiaiulitiirc, 
Ml  the  t(iur:>(.'  lit'  to  years,  of  fio.ooo.ooo  (."^48,700.- 
000).  a  Slim  whuli  was  actuall\  <lcnilili'(l  within  tlial 
|uriii(l.  In  iSj'i  he  ahi)h>hc(l  prdviiicial  hduiidary 
hiK's,  t-Mik  over  tliu  land  and  the  railwaxs,  ami  hnr- 
dtiu'd  the  -tate  with  a  lnll\-  developed  administrative 
•  irj^anizatii  III.  the  expenses  ot"  which  were  paid  fnr  by 
taxatidu,  and  carried  <int  "iily  with  the  help  of  loans 
and  a  heavy  debt. 

In  \^y()  Xew  Zealand  went  tlirongh  a  crisis  whicli 
won' 1  have  ruined  her  if  she  liad  not  been  saved  l)y 
tile  a|.[ilu'atii '11  of  refriLjeraliiin  tn  the  transportation 
nf  nuat.  I'Aen  with  that  help  it  took  her  16  years 
to  recover. 

T  sliall  not  speak  here  of  the  social  le,dslation  in- 
troduced by  William  I 'ember  Reeves,  fr  nn  1890  to 
1805.  which  has   fre(|iientl>-  been  remodeled. 

Xew  Zealand  has  owned  the  telegraph  since  1865; 
the  railways  since  1876;  the  telephone  since  1884. 
Xaiiniial  coal  mining  and  accident  insurance  were 
taken  uj)  in  igoF,  and  fire  insurance  in  190,^.  at  rates 
which  render  any  comijctition  im]jossible.  h'rom  time 
to  time  the  go\ernment  has  undertaken  the  operation 
if  small  industries,  such  as  the  purchasing  of  patents 
for  the  prussic  acid  process,  a  right  to  which  the 
<tate  leases  to  miners  for  a  certain  fee.  The  man- 
agetnent  n\  the  ovster  beds  of  Auckland,  the  estab- 
lishment of  fish  hatcheries,  the  stocking  of  the  rivers 
with  trout,  and  the  establishment  of  resorts  for  tour- 
ists and  invalids  are  also  among  Xew  Zealand  govern- 
ment enterjirises. 

r.ut.  although    Xew   Zealand   represents   the  maxi- 

29 


h\ 


WHKKl.    AM)    WilV    l-LliLlC    OW  X  KRSH  IP    HAS    lAII.R 

tmim   (if   effort    in    ilic 

few 

nient 


RD 


^■'ly   "t    Socialist   enterprises, 
lew   induMnes  are  directly  niana-ed   !)>•   the  govern- 


Scarce  y  a  month  passes."  says  Mr.  Guy  H.  Schole- 
fiehf  without  some  convention  passing  a  cheerful  reso- 
lution .lemandmg  that  the  ^^overnmcnt  should  step  in  and 
operate  some  new  industry  for  the  heiietu  of  the  puhlic 
Aow  It  IS  hankinp:;  to-morrow  hakerie^;  over  and  over 
ajrain  some  mo<lcrate  reformers  have  called  upon  the 
f,M.vernment  to  hecome  controllers  of  '.c  liquor  traffic 
once  upon  a  time  it  was  importuned  I,  become  a  whole- 
sale tol.acco-seller:  more  than  once  to  purchase  steamers 
to  hg\n  the  supposed  monopoly  of  existing  lines."  ' 

"But."  say  Lc  F^ossignol  and  Stewart,  "notwith- 
standing these  demands,  the  feeling  seems  to  be 
^'rowing  that  the  government  should  not  move  too 
rapidly  in  the  direction  of  State  Socialism." 

7-  In  nationalization  of  the  soil  New  Zealand  has 
had  an  experience,  the  more  interesting  in  that  most 
of  the  soil  was  once  government  land.  Ought  the 
state  to  have  conserved  its  interest  in  the  land,  or  was 
Its  action  wise  in  transl.jrming  it  into  private  prop- 
erty? I  he  following  facts  regarding  this  question  are 
to  be  found  in  that  remarkable  work.  State  Socialism 
in  Acw  Zealand,  from  which  I  have  already  quoted. 

The  Hon.  William  Rolleston,  who  became  minister 
of  Public  Lands  in  1879,  held  that  one-third  of  the 
crown  lands  ought  to  be  leased  in  perpetuity  for  a 
rent  of  5  per  cent,  of  the  value  of  land,  with  a  revalu- 

^Nezv  Zealand  and  Evolution,  page  58. 

60 


GOVERNMENT    AND    MUNICIPAI.    TRAPlNr.    OPKRATIONS 

atidii  every  Ji  years.      The  resulting  resources  nught 
be  ap[)lied  to  education. 

ilie  Upper  Chamber  granted  the  right  of  purchase 
at  the  value  of  the  prairie  land,  or  £i  per  acre,  nfter 
anv  prosi)ective  proi)erty  holder  should  have  cultivated 
one-tifth  of  his  claim.  Socialist  legislation  devel- 
oped when  the  Liberal  party,  having  accpiired  a 
majority  in  the  elections  of  necember  5,  1X90, 
came  into  power  on  the  strength  of  two  issues, 
agitation  against  the  great  property  holders,  and 
agitaticm  of  workmen  whose  salaries  had  fallen 
since  1879  and  who,  in  the  month  of  November,  had 
organized  an  unsuccessful  strike. 

John  F^allance,  head  of  the  Cabinet  in  i8(;i,  and 
John  McKenzie.  minister  of  f'ublic  Lands,  were  ardent 
partisans  of  government  and  property  reform.  To- 
gether they  put  in  force  five  acts,  one  after  the  other, 
which  have  since  undergone  several  modihcations. 
Ballance.  also  a  partisan  of  nationalization  of  the 
soil,  was  anxicjus  that  one-third  of  its  lands  should 
remain  under  the  control  of  the  state,  to  be  leased 
by  it.  however,  with  periodic  revaluation.  His  plan 
fell  through.  McKenzie  granted  leases  for  999  years 
at  a  fixed  rental  of  4  per  cent,  on  the  capital  value 
of  the  land  at  the  time  the  lease  was  taken  up.  with- 
out revaluation.  The  area  which  could  be  held 
by  one  man  was  limited  to  640  acres  for  first- 
class  land,  and  2.000  acres  for  second-class  land. 
The  system  received  the  name  of  "the  eternal  lease." 
At  this  rate  of  lease,  the  government  would  lose  more 
by  way  of  land  tax  than  it  got  by  way  of  .  ent. 

But,  at  the  end  of  10  years,  the  perpetual  tenants 

31 


i0 


\MI1KK    AM,    UMV     n    1,11,     .^WMK..,,,,.     hn.     I vAIIRf) 

l>et(an  (m  a>k  f.,,  tl„>  nulit  m  I.nv  \hv  tnv|„,l,|  ,,|  ,iK.,r 
pr-l-cTtics.  riHl.aNnrpartv  wa^  o  Mi.lantlv  |.rnn.,s„u. 
auAaIuat,..n,,f,vntv  In  iwo;  ,1,,  r.^h,  .',,  purrhasc 
was  rec<)gnixe,I.  I,,,,  „n.Kr  o.n,l,ti.,ns  ,,,"  valnat,,,,, 
^vimh  pr.,v.,k.,|  Uk.  s,n,ni;c-t  rr>.ninK„t  Th.  tcn- 
:'"ts  nianUauKHl  thai  th.  s,air\  .ntcrcst  in  th.  Ia,.l 
was  nnlv  the  raiHlai,/n!  mual  nf  ^  per  ccin.  .,„  ,ho 
orii^Miial  \ahic'  ni'  il^.  Imi,]. 

The  k-a>c  ni  perpetuity  was  ahnUshcd  In-  the  \ct 
ot  1907,  ll,,uever.  u.nler  this  system  ,  .'f  k-asinj,. 
^vli.ch  had  been  i„  fnree  fur  ,5  vear.,  over  ,u^. 
""il""l  «»^-'-c-s  of  ,he  I.est  land  ,n  'the  cnl,.„v  luul 
beenj.arted  uuh  In  the  place  .,f  ,he  -eternal 
lease  was  enaeled  the  -renewahle  lea>e."  a  lea^e  for 
l^f.  year-.,  wuh  prnv,-,on  for  valnat,,  ,n  and  renewal  at 
''■',■  ,^'"'  "'•''■  '''■'"  ^■'"'  '■^■^'I'P'-a.sed  rent.  I'.nt  the 
PublK-  latid»  can  aluav.  he  .sold  unn,ed,atelv  on  the 
<.ccupatio,i-wuh-ri.i,du-ot-pnrrhase  svste.n.  It'  is  there- 
fore a  nn.lake  to  heheve  that  the  govenunent  of  Xew 
/-.ealand  owns  all  its  soil. 

On   March  ji.    u,o(k   the  total  area  uf  66.861440 
acres  was  held  rouj^dily  as  follows: 

Frcclinlfi 

Lea.c-,i   from   Crown 1^,500,000 

Held  hy  natives ::; <;.cxx>.ooo 

Reserved  for  educational  purposes  and  national     '■''°-'^ 

parks    

Unfit   for  use         i-'.-'50,ooo 

Not  yet   dealt   v^hh.'.'.'.'.'"    '"    '^•°^-°°° 

3,, 500.000 

Tt  fs  estimated  that  63  per  cent,  of  Xew  Zealand 
families  own  propertv  of  £,00  and  above:  and  it  is 
probable  that  73  per  cent,  of  the  families  own  some 

3-' 


(,o\KKNMKNr      \.M>     \I  I '  N  li   1 1' \  I ,      IKAhlM;     (  U'KK  A  TK  )  N'S 

kiihl  (.1  pii '|irrty.  A  iminltt^T  <>i  >mall  pri  >|)frta's  ;irf 
exein|it  trMiii  taxation.  Tliusf  who  art-  without  |)roi)- 
tTty  art'  youiit,'  ])i'o|)lf  earning  larjjc  salaries  who.  with 
hi-allh  and  a  fair  chance,  will  achieve  a  <.(ood  position 
in  life. 

1  he  land  laws  have  not  only  increased  ihe  number 
of  jjroprietors.  hut,  although  they  have  had  a  Socialist 
aim,  they  have  actnally  hrouijlu  about  ;inti-socialist 
results,  since  they  serve  to  encourajj;e  the  system  of 
private  ownership. 

The  bailor  p.arty  advocates  nationalization  of  the 
soil;  but  the  tenants  supported  i)y  the  freeholders, 
continue  to  demaixl  the  ri^hl  of  transforniini,'  their 
leases  into  j)ropi'rty  holdins^'s.  .\t  a  crisis  they  would 
insist  upon  a  lowering'  of  the  rent.  One  witness,  in 
1905,  made  this  profoun<l  observation  before  the 
Land  (">  iiiimission : 

"I  believe  in  the  freehold  because,  in  times  of  trouble, 
tile  freeliolder  is  the  man  to  whom  the  slate  will  l()oi<  ; 
and  the  leaseholder  is  the  man  who,  in  times  of  trouble, 
will  look  to  the  state." 

Messrs.  le  Rossignol  and  Stewart,  the  authors  of 
State  Socialism  in  Nczv  Zealand,  conclude : 

"it  is  not  easy  to  show  that  Xew  Zealand  has  derived 
any  l)enefit  that  could  not  have  l)een  obtained  from  free- 
hold tenure  combined  with  taxation  of  land  values." 

COXCLUSIOXS 


8.  Except    in    the    United     States    the    telegraph 
and  telephone  systems  are  nationally  owned  and  op- 

i3 


WHERE    AXn    WHY    PUBLIC    OWNERSHIP    HAS    FAILKn 

erated.  The  coining  of  nionc-y  is  also  a  function  of 
governments.  The  railways  are  government  owned, 
either  wholly  or  in  part,  in  France,  ^krmany,  Aus- 
tria-Hungary. Italy,  Denmark,  Sweden,  and  Belgium, 
but  the  extent  of  the  private  systems  is  greater  than 
that  of  government  lines. 

Industrial  operation  by  governments  and  munici- 
palities is  still  very  lin.ited  in  scope.  Nevertheless, 
it  is  already  sufficiently  widespread  to  make  a  con- 
clusion possible  as  to  whether  the  dreams  of  its  ad- 
vocates are  being  materialized,  or  their  promises  ful- 
filled. 


I' I 


34 


1 


BOOK   II 

FINANCIAL    RESULTS    OF    GOVERN- 
MENT   AND    MUNICIPAL 
OWNERSHIP 


I 


CHAPTER  I 

BOOKKEEPING  IN  STATE  AND  MUNICIPAL  TRADING 
ENTERPRISES 

1.  Report  of  Gustave  Schclle  to  the  International  Statisti- 

cal  Institute. — Denmark. 

2.  Receipts  and  Expenses   of   Public  Operation   in   France; 

("osts  of  Construction. — Receipts  and  Expenses  Out- 
side of  the  Budget. — Special  Accounts. — Capital 
Charges. 

3.  British    Municipalities.  —  Belgium.  —  Sweden.  —  City    of 

Paris. 

4.  Austria. 

5.  Conclusions. — Attempts    to    Organize    Special    Accounts 

for  Government  and  Municipal  Trading  Enterprises 
Have  Failed.  They  Are  Incompatible  with  a  Homo- 
j,'(.'ncous  Budget.  Sane  Bidget  Regulations  and  Public 
Operation  of  Trading  Enlci prises  Are  Contradictions  in 
terms. 

1  I  have  already  »iuote(l  from  the  report  to  the 
International  Statistical  Institute,  compiled  by  Gus- 
tave Schelle,  former  minister  of  Public  Works,  where- 

35 


WHERE    AND    WHY    PUBLIC    OWNERSHIP    HAS    FAILED 


i^i 


in  he  discusses  tlie  financial  situation  of  the  vari- 
(jus  state  and  niunic't-il  trading  enterprises,  from 
which  he  has  received  reports,  with  all  the  authority 
(jf  his  official  position,  and  with  a  mind  which  has 
remained  both  alert  and  independent  throughout  his 
administrative  career.  I'he  difficulties  in  the  way  of 
estimating  and  comparing  the  value  of  such  enter- 
prises are  very  great. 

In  Denmark,  for  example,  railway  outlays  for  pen- 
sions and  general  administration  and  inspection  costs 
are  borne  by  the  railroads  themselves.  For  other 
enterprises  such  costs  are  met  by  the  general  budget. 

Bef  1  1904  and  1905  the  postoffice  and  the  tele- 
graph yielded  no  net  proceeds.  In  1908-1909  this 
was  also  true  of  the  mint. 

No  report  is  made  regarding  the  interest  charges 
upon  loans  for  the  establishment  of  such  enterprises. 

In  1908-1909  the  results  of  municipal  operation  of 
gas,  electricity  and  water  were  as  follows: 

COPENH.AGEN 

Plants  Capital.  Net    Proceeds, 

Crowns  Crowns 

Gas    4  30,636,000  3,247,000 

Electricity    5  14,451,000  3,490,000 

Water    6  12.392,000  632,000 

Provinci.al  Cities 

las    57  13.144,000  1,640,000 

Ele't'icity    17  4,727,000  450,000 

Water    50  10,873,000  839,000 

In  Holland,  according  to  information  furnished  by 
M.  Methorst.  dirtctor-in-chief  of  the  Central  Bureau 
of  Statistics,  the  cust  of  constructing  the  postoffice, 
telegraph  and  telephone  .systems  amounted,  on  Janu- 

J" 


lidOKKEEPING   IN   STATI-:  AND    MUNICIPAL   EXTERPRISKS 


ary  ii,  1909,  to  24,854,000  florins  ($9,941,000). 
This  capital  bears  an  interest  charge  in  favor  of  the 
l)nbhc  treasury  of  3J.<.  per  cent.,  for  the  systems  were 
cstabHshed  by  means  of  piibbc  funds.  Repayments 
arc  made  pcritnHcally  at  a  rate  varying  from  i  to 
ijy'j  per  cent.  The  enterprise  has  a  special  double 
entry  system,  and  no  account  is  taken,  in  reckoning 
up  receipts,  of  either  free  railroad  transportation  or 
official  correspondence. 

The  funds  for  the  operation  of  the  \\'ilhelmina  and 
I-'nima  mines  are  supplied  by  the  budget. 

X(j  information  is  given  in  the  report  concerning 
tlie  financial  results  of  municipal  enterprises  in  Italy. 


2.  I  quote  literally  the  observations  of  M.  Schelle 
concerning  France : 

A.  Receipts  and  Expenses  of  Operation: 

'Tn  the  case  of  the  mints,  the  National  Printing  Office 
and  the  state  railroads,  the  receipts  and  expenses  of  op- 
eration are  placed  opposite  each  other  in  l)udgets  an- 
•ic.xcd  to  the  general  budget,  and  the  difiference  in  gain 
or  loss  is  indicated  only  in  this  latter  budget.  The  rec- 
ords of  expenditures,  however,  as  well  as  of  receipts,  are 
incomplete. 

"Tn  the  case  of  the  fiscal  monopolies,  the  postal  service 
and  the  official  journal,  the  receipts  of  operation  are  in- 
cluded in  the  general  receipts  of  the  general  budget,  while 
tile  ex[H'nses  are  charged  to  the  department  under  whose 
jurisdiction  the  enterprise  may  happen  to  be,  without 
any  comparison  being  made  between  receipts  and  expen- 
ditures. 

37 


i 


10 


WHERE    AND    WHY    PUBLIC    OWXERSHH'    HAS    rAH.EI) 

''As  for  the  other  and  less  important  industrial  enter- 
prises, the  provisions  of  the  general  budfjjet  furnish  no  in- 
dication whatever  of  their  condition.  Tentative  receipts 
are  mixed  with  tiie  receipts  of  other  enterprises  under 
different  headings. 

"Sometimes  the  expenses  are  deducted  from  the  gross 
receipts,  and  the  net  proceeds  alone  figure  in  the  budget ; 
sometimes  they  are  included  in  the  expenditures  of  the 
department  concerned,  now  and  then  without  beitig  in 
evidence.  Information  on  the  subject  of  these  enter- 
prises is  impossible  except  in  the  final  accounts." 

B.  Costs  of  Construction: 

"The  costs  of  construction,  .  the  case  cf  certain  enter- 
prises, are  so  mixed  in  the  accounts  with  other  expenses 
as  to  make  it  utterly  impossible  to  disentangle  them. 
Even  where  enterprises  Iiave  been  made  the  subject  mat- 
ter of  the  budgets  called  annexes,  the  budget  documents 
and  the  final  accounts  for  each  year  indicate  only  the 
increase  in  the  expenses  to  be  incurred  during  the  year 
under  consideration,  without  regard  to  the  expenses  of 
former  years.  In  order  to  get  at  the  amount  of  capital 
employed,  it  is  necessary  to  examine  the  final  accounts  of 
all  the  years.  The  resulting  labor  sometimes  recalls  that 
of  the  Benedictines,  and,  moreover,  is  far  from  always 
yielding  satisfactory  results,  whether  by  reason  of  the 
antiquity  of  the  expenses  or  the  impossibility  of  disen- 
tangling them." 

C.  Receipts  and  Expenses  Outside  of  the  Budget: 

"Government  undertakings  keep  no  daily  record  of  the 
requisitions  made  on  them  by  other  departments,  so 
that  importani  financial  transactions  do  not  appear. 

"Certain  utilities  profit  gratuitously  from  services  ren- 

38 


IIODKKKFPING  IN   STATE  AND   MUNICIPAL  ENTERPRISES 

(Icrcd  tlicni  l)y  other  public  or  quasi-public  enterprises; 
tlui>  tlu-  postal  and  telegraph  departments  pay  the  rail- 
roads for  but  a  small  share  of  the  services  which  they 
receive  from  them. 

"I'ublic  enterprises  do  not  pay  rent  for  the  use  of 
f;overnnient  property,  for  the  real  estate  they  occupy, 
nor  are  they  charged  with  the  materials  they  use.  On 
the  other  hand,  the  Xationul  Printing  Ofifice  includes 
annjiig  its  receipts,  at  a  rate  which  is  generally  considered 
higii,  the  amount  of  work  which  it  does  for  other  depart- 
ments. It  does  not  include  among  its  expenses,  however, 
tlio  interest  on  the  capital  sunk  in  the  buildings  in  which 
it  is  installed. 

"The  postal  and  telegraph  facilities  granted  to  minis- 
ters and  various  public  departments  do  not  figure  among 
the  receipts  of  the  postal  enterprises. 

"iMnally,  among  the  annual  expenses  of  the  post  and 
telegraph  offices  are  included  the  subsidies  paid  to  packet 
boats  prompted,  at  least  in  part,  by  considerations  alto- 
gether foreign  to  the  mail  service." 

D.  Special  Accounts : 

"When  an  enterprise  possesses  a  technical  equipment 
or  a  stock  of  merchandise,  no  document  ever  shows  the 
true  value  of  such  equipment. 

"Exceptions  to  the  above  are  the  special  accounts 
published  at  the  close  of  each  fiscal  year:  ist,  in  the 
matcli  anfl  tobacco  monopolies  ;  2d,  in  the  case  of  the 
state  railroads.  However  the  value  assigned  in  these  spe- 
lial  accounts  to  stock  and  equipment  is  not  a  commercial 
value.  It  is  a  simple  difference  between  the  expenses  of 
purchase  and  manufacture  and  the  proceeds  of  actual 
sales. 

"Moreover,  the  fixed  capital,  buildings,  real  estate,  etc., 

39 


0 


WHERE   AND    WIIV    I'UBLIC    OWNERSHIP    HAS    EAILED 


I       I 


of  tlic  enterprises  enter  into  tliese  acxounts  in  the  same 
manner  as  the  stock  of  manufactured  prochicts,  so  that 
it  is  impossible  to  get  at  the  capital  really  involved. 

"Finally,  the  amount  realized  from  sales  of  real  es- 
tate, when  there  are  any,  is  not  deducted  from  the  capi- 
tal, such  sales  being  made  by  the  Guvernment  Lands  De- 
partment. 

"The  accounts  of  the  Government  Railroad  Depart- 
ment published  each  year  are  no  more  satisfying.  State- 
ments as  to  the  costs  of  construction  are  to  be  found 
among  them,  but  these  include  only  those  expenses  con- 
tracted directly  by  the  department,  and  no  mention  is 
made  of  the  very  considerable  expenditures  which  are 
covered  by  the  budget  of  the  ministry  of  Public  Works. 

"The  Statisfiqiic  dcs  Chciiiins  dc  (•'cr  is  tlie  only  docu- 
ment which  gives  an  '^i)proximate  idea  of  the  actual  costs 
of  construction  of  the  state  railroads  and  that  of  the 
small  line  of  Saint  Georges  de  Commiers  a  La  Mure." 


E.  Capital  Charges: 

"It  is  not  sufificient  to  know  the  amount  of  actual  capi- 
tal invested  in  an  industrial  en'erprise  in  order  to  be  able 
to  form  a  correct  judgment  as  to  its  management.  It 
is  also  necessary  to  be  informed  as  to  the  capital  charges. 
Exact  computation  is  impossible  unless  the  expenses 
relative  to  each  enterprise  have  been  covered  by 
special  loans.  We  must  be  content,  therefore,  with  an 
approximation  difificult  to  make  at  this  late  day,  because 
no  care  has  been  taken  to  make  such  an  estimate  each 
year  since  the  enterprises  were  established.  In  order  to 
make  any  progress,  it  would  be  necessary  to  estimate 
the  applicable  rates  based  on  the  price  of  government 
bonds  or  of  bonds  guaranteed  by  the  government  at  the 
time  whe:i   the  various  construction  expenses  were  ir- 

40 


I 


es- 


BOOKKEEPING  IN   STATE  AND  MUNICIPAL  ENTERPRISES 

currcd.  'Fxpenses  for  oiiildinj:^  materials,  etc.,  and  for 
the  installation  and  cq'!.p::ient  of  the  various  government 
enterprises  have  bee',  a  burden  upon  the  Treasury  since 
that  date.  This  is  e\i(icnt  in  the  case  of  the  costs  of  con- 
-truction  defrayed  with  funds  from  loans  not  yet  paid 
off.  But  it  is  true  also  of  expenses  paid  for  in  this  or 
that  year  out  of  the  ordinary  resources  of  the  budget. 
These  expenses  may  not  be  considered  as  paid  off  while 
a  perpetual  public  debt  exists,  even  though  resources  are 
at  hand  which  might  have  been  employed  toward  their 
extinction." 

3.  The  municipalization  of  puljlic  utilities  has  con- 
siderably increased  the  expenses  and  debts  of  British 
local  governments.  M.  Schelle  declares,  however, 
that  he  has  been  unable  to  obtain  the  data  necessary 
to  a  compilation  of  statistics  as  accurate  in  character 
as  the  purposes  of  the  International  Institute  would 
naturally  require. 

A  portion  of  his  report  is  devoted  to  the  financial 
condition  of  the  Belgian  state  railroad,  of  which  we 
will  speak  later  in  detail. 

In  Sweden  the  principal  state  operations  are  the 
postal,  telegraph  and  telephone  services  and  the  gov- 
ernment railways.  The  receipts  from  the  railways 
represent  1.30  per  cent,  of  the  average  annual  capital. 

The  City  of  Paris  municipalized  the  service  of 
burying  the  dead  in  1905.  In  1906  the  receipts  were 
5,242.000  francs  ($995,980),  while  the  labor  and 
ecjuipment  expenses  were  respectively  2,500,000  francs 
($475'<''Oo)  and  2,135,000  francs  ($405,650),  or  a 
total  of  4,635,000  francs  ($880,650). 

In  1910  the  receipts  were  4,660,000  francs  ($885,- 

41 


WHERE    AND    VVIIV    I'UBI.IC    OVV  N'iCRSIlIP    HAS    FAILED 

400).  The  labor  expenses  had  risen  to  2760.000 
francs  ($524,400)  while  those  for  equipment  had  been 
rechiced  to  i.;65.,)oo  francs  ($3.^5.350).  At  the  same 
time  there  was  an  outstanchng  loan  of  348.000  francs 
($06. 1  JO)— a  total  expense  of  4.873.000  francs 
(S(;25.87o). 

In  the  case  of  the  (piarry  operated  by  the  City  of 
Paris  the  results  are  still  more  unsatisfactorv.  accord- 
ing to  a  report  to  the  Municipal  Council  in  1908.  The 
labor  exi)enses  are  very  much  higher  than  in  neigh- 
boring quarries. 

4-  An  important  part  of  the  report  is  devoted  to 
Austria,  and  is  based  upon  a  previous  report  drawn  up 
under  the  direction  of  J.  G.  Griiber,  by  Dr.  Rudolph 
Riemer.  secretary  of  the  Central  Bureau  of  Statistics. 

Outside  the  usual  monopolies  the  Austrian  govern- 
ment owns  docks  and  mines  and  operates  lotteries. 

In  most  of  these  enterprises  the  costs  of  construc- 
tion and  of  equipment  are  indicated  separately  in  the 
f^nal  accounting,  but  only  those  expenditures  made 
durmg  any  one  year  are  to  be  found  there,  regardless 
of  those  of  the  preceding  years.  The  items  for  deter- 
mining how  much  of  the  original  debt  has  been  paid 
off  are  lacking.  Interest  and  sinking  fund  charges  on 
loans  contracted  in  view  of  government  operation 
do  not  figure  in  the  final  accounting  in  the  chapter 
especially  devoted  to  the  particular  industry  con- 
cerned, but  in  a  chapter  issued  by  the  ministry  of 
Finance  under  the  heading.  Public  Debt  ami  Adminis- 
tration of  the  Public  Debt.  Special  information  in 
regard   to  the   auditing   of   the   public  debt   may   be 

42 


I'.OMKKF.F.PIXG   IN   STATE   AXI)   MlN'inrAr.   ENTERPRISES 


1(11111(1  ill  iIr-  aiimial  report  of  the  special  cominittee 
( ( 'Minini>si<Mi  de  ('oiitn'ile  )  niatiajj;iii,s,'  the  debt.  P)Ut 
in  this  rep(jrt  the  iiiforiiiation  touching;  interest  and 
siiikinj,'  fund  charji;es  does  not  inform  us  as  to  the 
actual  application  of  the  loan. 

The  same  conditions  prevail  in  tin  case  of  the  pub- 
lic debt  contracted  for  the  benefit  of  the  railroads. 
Our  intormation  covers  only  interest  and  sinking 
fund  charges  (jn  the  aniortizable  debt.  But  even  that 
portion  of  the  debt  docs  not  represent  all  the  loans 
contracted    for  the  benefit   of  the   railroads. 

.\ccording  to  the  Statistiqiie  dcs  Finances  dc  la 
Uautc-.lutrichc  ct  dc  Salzburg  (8th  annual  report) 
the  expenses  of  all  the  towns  of  Upper  .Austria  aris- 
ing from  the  operation  of  their  utilities  amount  to 
4. 44  per  cent,  of  all  their  expenses.  The  costs  of  con- 
struction are  (|uoted  en  bloc  in  a  special  chapter. 

The  result  of  M.  Schelle's  investigation  proves  that 
almost  everywhere  the  data  necessary  in  order  to  de- 
termine exactly  the  jirofits  or  losses  upon  state  or 
municipal  industrial  operations  are  insufficient. 


"Whatever  he  the  end  in  view  when  states  or  munici- 
prililies  organize  industrial  enterprises — whether  the  ob- 
ject be  fiscal  or  economic,  for  the  sake  of  the  consumer  or 
even  in  the  exclusive  interest  of  employees — it  is  indis- 
pensable to  know  whether  these  enterprises  are  actually 
resulting  in  profits  or  losses,  anrl  the  amount  of  each. 

"As  far  as  the  essential  functions  of  the  state  are  con- 
cerned, such  as  providing  for  public  safety,  public  high- 
ways, etc.,  the  establishment  nf  spc-ial  accounts  would  be 
impossible  and  without  nnich  value,  inasmuch  as  these 

43 


I 


VVIIKRK    AND    VVIIV    priil.IC    ()\V  ,\  KRSI  |  |  p    1 1  ,\ 


S    lAII.KD 


?ervK-cs  provide  no  opportuiiitv  f..r  .lirrct  payment  on 
the  part  of  consumers.  Such  services  derive  no  re- 
c-cipts,  properly  so-called,  nor  can  thev  he  ahohslicd. 
W  hen  It  H  expedient  to  know  wlietlier  the  management 
of  the^e  activities  is  nt.t  t(-  e.xtrava.jrant.  it  is  necessary 
to  proceed  hy  contrasting  one  year  witii  anotiicr.  or  hy 
coinpannt,'  certain  items  of  expense  witii  sinnlar  items 
m  oilier  countries,  or  in  other  localities. 

"rnhlic  industrial  enterprises  are  almost  never  essen- 
iial.   since  they   may  he   intrusted   to  private   operation. 
Ihey   resemhle   private   enterprises   and   i)rovide   oppor- 
tunity for  s{)ecial  receipts.     It  should,  therefore,  be  pos- 
siMe  to  furnish  to  the  taxpayers,  in   whatever  concerns 
tliem.  means  of  knowinj,'  the  amount  of  income,  just  as 
opportumties   for  such   information  are  atYorded  to  the 
stockhulders  .-r  creditors  of  any  private  concern.    To  pre- 
tend that  the  financial  side  of  state  or  municipal  enter- 
prises should  he  ne-lected  because  such  imdertakinj^s  are 
created  for  the  public  interest  is  only  an  effort  to  side- 
track possible  criticism.      Public   management,   like  any 
other,  can  be  j^ood  or  bad.     If  it  is  directed  toward  se- 
curni.cj  advantages,  justly  or  unjustly,  to  this  or  that  class 
of  people,  whether  consumers  or  employees,  it  is  at  least 
necessary  that  those  who  are  to  foot  the  bills,  that  is' to 
say,  taxpayers,  should  know,  personally  or  through  their 
representatives,  whether  the  contributions  demanded  are 
not  exorbitant.     Such  a  requirement  should  not  be  ques- 
tioned in  any  country. 

"From  another  point  of  view,  how  can  the  preten- 
tion be  sustnined  that,  in  certain  cases,  the  state  or  munic- 
ipality can  serve  the  public  to  better  advantage  than 
private  companies  when  such  states  or  municipalities  do 
not  furnish  the  public  with  adequate  information  con- 
cerning their  administration. 

44 


•J 

I 

I 


liooK  Kl  I'I'IN   ■    IN    STAT!-:    AN'I)    MI'MCIPAI,   ENTERPRISES 

CONCI.rsiONS 

5.  "In  fact,"  cniuludc-.  .M,  Scht-lle,  "the  efforts 
made  to  orf/anicc  spiiiii!  (ucoinits  for  state  and  iiiti- 
itiiipal  industrial  riitcrprist-s  have  failed.  Pnl)lic 
iloc-iiiiK'iit-^  SdiiK'tiiiR's  t'urni>h  precise  eiiou.ij;!!  iiifur- 
inatiiin  as  to  receipts  nr  expenses  of  operation.  Imt  it 
!->  nearly  always  dit'ficult  {<>  discdver  tlie  amciunt  of  the 
costs  of  construction,  and  it  i<  inii)i)>sil)le  to  j^^ct  any 
a(le(|uate  ide;i  of  capital  charp^es.  interest  and  amor- 
tization." His  observations,  in  ref:;ard  to  Denmark, 
Holland.  I'Vance.  and  Austria,  prove  that  in  no  respect 
lid  the  accounts  ever  l)ring  out  the  real  gains  or  losses 
of  st.'ite  enterprises. 

The  (lifticulties  encountered  arise  from  the  fact  that 
a  state  (jr  a  municipality  cauiiot  have  more  than  one 
Uud'^j^ci.  Alore(jver  (7//  the  receipts  should  be  entered 
dii  one  side,  all  the  expenses  on  the  other.  In  this  re- 
spect at  least  public  organizations  slKnild  be  managed 
like  jirivate  corporations.  If  these  latter  fail  their 
creditors  demand  the  amount  of  their  claims  at  so 
many  cents  on  the  dollar.  A  liudl-orf/aniced  state 
should  Inwe  only  one  pitrse.  nor  shoidd  any  distinction 
he  )nade  betzceen  its  7-arioits  loans.  All  shoidd  be 
secured  u{^on  one  single  guaranty— its  credit. 

Without  a  unified  budget  sound  finance  is  out  of 
the  ipicstion.  .\  special  aicount  for  a  state  or  munici- 
!)al  industrial  enterjjrise  jan  have  only  a  fictitious 
value. 

/'/  ()fher  7i'ords.  sane  budget  regulations  and  public 
nuinagetnent  of  trading  enlerprises  are  contradictions 
in  terms. 

45 


gl 


CHAPTER  II 

THE     ni:LGI.\N     STATF,     RAILROADS 

r.  AccOMnts.-Cap.tal  (  harfi:es.-Rates  of  Issue.-Review  of 
Rocaps     a,ul     [•.xpc.Him,rcs.-l.-,„al      I>n,fi,s     Do     Vo 
Comnbute  touanl   Ha,a„c.„,  the   Hu<i,ct.-/7..  Bucig^l 

Hube";^  "         ^ovember  29,   igu.-Plan  of   M. 

I.  Railroads  are  the  most  important  industrial  en- 
tcrpr.ses  inulertaken  by  a  state.  What,  then,  are  the 
hnancial  results  of  their  public  operation? 

The  Belgian  state  railway  was  established  by  the 
organ.c  law  of  June  i.  1834.  By  reason  of  the  length 
of  time  ,t  has  been  m  operation  it  has  a  right  of 
precedence.  s   >■    ->>■ 

Marcel  Peschaud  has  published  in  the  May  and  Tune 
numbers  of  th.  AV...  I'ol.u,,,  ,,  /^a./.'.^lir: 
remarkable  study  of  the  Belgian  railways,  but  his 
analysis  wou  ,1  lead  us  too  far  astray.  J  must  con- 
^ne  myself,  therefor-,  to  a  resume  of  what  M  Schelle 
has  to  say  on  the  subject  in  his  report  to  the  Inter- 
national Statistical  Institute. 

The  law  of  1834  provided  that  a  complete  account 
of  the  operations  of  the  railways  be  presented  to  the 

40 


Till':  iJi.i,(;i.\N 


SlATl:    RAILROADS 


riianilRTs  annually.  l)y  wimli  aiconiu  at 
the  receipts  anil   cxpeiulitiircs,    tn"c'tl 


't  t!ic  funds  for  tli 


('  iMK  rrslood 


H'l    ivith  I  Ik-  use 


e  constructmn  of  iincs  placed  at  tlu 


disposal  of  tlie  new  department.      '11 
rendered  .soon  ])roved  to  he  a!to<'et 


ena 


In    1845    c'siiniates    of    iut 
rges    were    added    to    the    previoi 


le  aecounts  dnis 
luT  inade(,iiate. 
iTo^t    and    sinkiu'^    fiuid 


IS    re(|uirenients. 


Controversies  arose  ov-r  these  estimates,  and  it  be- 
came necessary  to  chanj^^e  the  svsteni  several  times  in 
order  to  settle  the  rate  .|hestion.  At  the  close  of  1878 
It  was  decided  that  the  ,.  mairement  of  the  railroads 
should  make  up  a  balance  sheet  in  the  form  of  com- 
mercial balance  sheets.  This  was  done,  but  cai)ital 
char^-es  were  computed  at  a  uniform  rate  based  on  a 
period  of  retirement  of  ninetv  years. 

•Moreover,  accordni.tr  to  Ai.'Xieolai  (Co7rrn,iu;,t 
Railways  of  Bchjinm,  1885)  the  cost  of  replacements 
anri  reconstructions  was  charged  to  the  construction 
accounts  without  deductions  for  renewals  and  rei)airs. 
On  the  other  hand,  the  annual  payments  for  the  pur- 
ehase  of  lines  which  should  have  been  charged  to 
construction  were  charged  to  operation. 

_  "Xever,"  says  the  minister  of  Public  Works  [Retort 
for  the  year  iqoj),  "h.avc  the  railway  accounts,  that  is 
to  say,  the  accounts  prescribed  by  law,  been  round  othc- 
tian  defective.  On  the  contrary,  the  statements  of  con- 
ditions, the  statistics,  the  estimates  and  reports  relating 
"1  part  to  such  items  as  interest,  sinking  funds,  pensions 
etc.  (which  are  not  within  the  legal  powers  of  the  rail- 
road department  10  pass  upon),  have  never  ceased  to 
be  the  subject  of  the  most  lively  discussions.  Charges 
liave  been  made  in  turn,  or  sometimes  simultaneously,  that 

47 


m 


WIIKKK 


AM)    W  ll^■     !'I   i:i  ic    OWXFKSini' 


I!  ^S    FAII.KU 


the  prohi-.  wrre  ,^urlk<I  au.l  .cnccalcl.  that  there  was  too 
nnieh  red  tape,  even  to  the  point  of  .h•s^e,t,^•lr.hn-  the  es- 
sentia! rules  of  a  husiness  enterprise,  or  that  there  was 
not  enou,i,W,  .■ontrol.  heeause  the  aecounts  were  separate 
froir  those  of  the  Treasury.  The  suhjeet  has  furnished 
an  i:ie.vhanstil)le  theme  of  arf,nnnent." 


Ot  late  years  it  has  been  decided  that  the  data  con- 
tained m  the  annual  reports  (m^n  to  he  kept  with  the 
FreaMu-y  aecounts.  an<l  that  the  halance  sheets  should 
he  made  up  I)etween  the  departuient  of  I'uhlic  Works 
and  that  of  iMuance.  1  he  acxnuits  lor  kjos  and  the 
years  tollowin-  have  heen  established  upon  this  new 
basis. 

As  for  capital  char-es  met  by  enlar^n'ng  the  public 
debt,    a    rate    of    is..ue    was    adopted,    wh'        varied 
from  4.()o  per  cent,  to  3.11  per  cent.     Then  tiie  gov- 
ernment   proceeded    to    publish,    under    the    title    of 
"aiuuwcs"    to    the    financial    report:       i".   A    general 
balance    sheet     for    the    eear    ending    December    71 
sh(nvmg  on    the   credit   side   construction   costs   since 
the    begmmr.g    of    the    undertaking    and    the    gross 
operating    receipts    and    on    the    debit    side    the    cap- 
ital   already    retired    and    remaining    to    be    retired, 
the  amount  of  charges  upon  this  capital,  the  due^  and 
rents  paid  bv  the  state  raiiwav  svstem  to  other  rail- 
ro.ad    enterpris  s.    operating   expenses   and    the    proht 
and  loss  balance.     2".  ,\  separate  account  of  operating 
receipts    and    e.xpenditnres    for    the    preceding    year. 
3  •  A  provisional  accoui.t  of  operations  for  the  cur- 
rent year,  and  of  profu  and  loss,  comprising,  on  the 
one  hand,  operating  expenses,  pensions  charged  to  the 

48 


THrC    BELGIAN'    SI  A  IK    RAll.KO  ,1)S 

general  budget,  fixed  charges,  including  yearly  in- 
stallments, and  the  portion  of  receipts  due  to  com- 
panies whose  lines  are  operated  by  the  government; 
and.  on  the  (jther  hand,  the  profits  of  operation,  prop- 
erly so-called,  together  with  various  other  i)rofits. 
4"  A  table  recapitulating  the  financial  results  since 
the  establishment  (;f  the  system  (  r8_^5)  setting  forth 
the  annual  balances  in  profits  or  in  lo>ses.  s"-  A  table 
of  interest  and  sinking  fund  charges  from  the  be- 
ginning.    Finally,  tables  of  operating  .statistics. 

As  a  result  of  the  new  system  adopted  the  profit 
shown  in  a  large  number  of  the  previous  reports  was 
transformed  into  a  deficit. 

The  report  for  the  year  1909  gives  the  following 
results,  com-   Ued  in  francs : 


Installation  Costs 

frsncs 

Lines  constructed  by  the  state 675,655,000 

Lines  constructed  by  contract i76,'3i7,ooo 

Lines  purchased  and  completed 978,'oi7,'ooo 

Completion  of  lines  operated  tinder  rentals 10^293000 

Station   structures    72!928.'ooo 

tl"'"^:^'>'^    18.547.000 

^l^'Pn'ent    719,188,000 

nr     ,  ■  u  '"''*'    •■••■•■••••••; 2,650,945.000 

Ut  which  amount  there  has  been   retired  by  sinking 
fund  charges    350,105,00c, 

Uifferer        2,300.840,000 

I  he  difTereii'      was  made  up: 

By   the   fund-u   debt i, 9.59,9 17.000 

Ly  annual  appropriations  for  purchase 340,024,000 

^  "'^'    ,2,299,941,000 

49 


Ulll'.Kl-:    AM)    WIIV    I'UIil.lC    OWNKKSlIll'    ilAS    I-AILEU 

Interest  and  sinkinj:^  fund  charges  were  computed, 
for  1908.  at  (;4,oi 5,000  francs  and.  for  i«)0(),  at  97,- 
020,00c  francs. 

I'JOH  igo() 

Total    receipts    _'6(),36_',ooo        jRi, 532,000 

iotal   expenses    kSj,3<; i ,ocx)         190,540,000 

86,(j7i,0(xj  <>3.<j<)_',ooo 

Deduct    interest    and    sinking    fund 
cliarges   94,01 5,000  97,020,000 

tJeficit     7,044,000  6,028,000 

"To  sum  up,"  concludes  M.  Schelle,  "if.  from  the 
very  beginning,  we  compare  the  pc^sitive  with  the  nega- 
tive balance  of  each  year,  and  atld  the  sum,  we  find 
in  1908  a  hnal  net  profit  t)f  30,966,000  francs  and  in 
1909  one  of  24.938,000  francs." 

The  ma.ximum  net  gains  were"  44,975,000  francs 
in  19 10,  and  the  maximum  net  losses  73,998.000 
francs  in  1S86.  During  many  years  the  summaries 
which  now  show  deficits  would  ha\  c  shown  profits  in 
the  years  previous  to  1885. 

The  fancy  that  the  state  budget  can  ever  be  repaid 
for  its  outlay  through  the  profits  of  the  railroads  no 
longer  exists   in  Belgium. 

M.  IlcUeputte,  minister  of  Railways,  says  in  his 
preliminary  note  to  the  operating  report  of  1908: 


■ 


-a 


"The  operation  of  liclgi'ui  railways  has  undergone 
various  fortunes.  .Since  1835—74  years— the  l)alance 
has  shown  a  deficit  36  times  and  38  times  a  profit.  Since 
the  beginm'ng  of  these  operations  the  total  profits  exceed 
the  total  deficits  only   by  the  small   sum  of   31,274,000 

50 


IHr-.    HKI.r.IAN    STATK    RATLROAPS 

francos,  or  an  annual  average  of  4J2,boo  francs  for  an 
average  active  capital  of  778,733,000  francs,  or  .05  per 
cent.,  all  of  which  amounts  to  saying  that,  up  to  the 
present  day,  the  railroad  has  operated  at  cost." 

The  report  goes  on  : 

"If  we  take  into  consideration  the  accumulated  inter- 
est upon  the  deficits,  the  amount  of  which  had  to  be  bor- 
rowed from  the  Treasury,  and,  if  we  deduct  the  debit 
balances,  the  apparent  surplus  gives  place  to  a  deficit  of 
J<f).83(),ooo  francs,  or  an  average  annual  loss  of  1,173,000 
francs— <x  II  per  cent,  of  the  average  working  capital."' 

During  the  great  convention  of  Belgian  nianufac- 
lurers  and  merchants,  on  November  jy,  191 1,  M. 
I  aiiiKiii-I.egrand  said  :  - 

"The  lielgian  government  acknowledged  a  loss  of  6,- 
</j5,ooo  francs  in  MiOJ,  more  than  7  millions  in  1908, 
and  6  millions  in  1909.  In  1910  we  were  promised  a 
jirofit  of  4,500,000  francs,  wliich  has  now  dropped  to 
2.7(;o,ooo  francs. 

"On  the  other  hand,  the  capital  investment  has 
reached  2,731,000.000  francs,  showing  an  average  in- 
crease for  the  last  three  years  of  50,000  francs  per 
kilometer  for  the  whole  system  (4,329  kilometers— 2,706 
miles). 

"Thus,  during  the  year  mio,  the  capital  invested  by 
the  government  in  its  railways  realized  exactly  o.io  per 
cent.     This  was  an  absolutely  exceptional  year,  both  in 

Rczue  Gnu-rale  dcs  Chcmins  de  Fcr.   November,   iqii    page 

'  BuUctm  dii  Comitc  Centra!  du  Travail  Industrie!.  December 
IS,  1911. 

51 


VVHKRE   AND    WFIV    Pl'Htff    0\V  MFRSTlri' 


HAS    FAILED 


olnmc  of  traffu-  an,!  i„  frei^Hu  an<l  , ..sender  receipts, 
ft  I.rnupht  into  the  euffers  of  the  railn.uls  ^  7-^000 
fra.ics  mere  than  in  i,,,<,  i„  whieh  year  the  system  had 
earned  approximately  12,230,000  francs  more  than  in 
1900. 


We  are  thus  justified  in  concluding  that  the  budget 
ot  the  P.elgiau  f,^overnment  has  derived  no  advantat^e 
troin  the  ojjeration  of  railways. 


2  But  does  not  such  operation  redound  greatly 
to  the  advantage  oT  travelers  and  shippers  := 

The  i)artisans  of  r)\vnership  atid  operation  of  rail- 
roads l,y  the  state  are  C(.nstantlv  harping  upon  the 
cheap  rates  (.t  state  railways,  as  opposed  to  the  high 
rates  established  by  private  companies. 

By  an  order  issued  <m  the  j.sth  of  October,   loir 
the  minister  of  the  Belgian  Raihvav  department  raided 
the  rates  on  pit  cal  on  the  strength  of  a  law  of  1910 
which     in    Its    turn,    found    support    in    anotiier    law' 
passed  April  12,  1835,  which  says: 

"Temporarily,   and    while    waiting    for   experience   to 

guide  to  a  hnal  a.ljustment  of  the  rates  to  be  levied  by 

he  afr.resaid  road,  in  conformity  with  Article  s  of  the 

law  of  May  i,  1834,  these  rates  shall  be  regulated  bv  a 

royal  decree."  -^ 

Now.  Article  5.  of  the  law  of  May  r.  1834,  under 

which    the    Belgian    system    was    established,   reads- 

I  he  profits  of  the  road  accrue  from  ihe  rates  which 

are  u,  be  regulate.!  annuall>  by  law."     Thus,  the  law 

of  1835  "=^  only  a  temporary  expedient,  which  must  be 

52 


THE    BELGIAN    STATE    RAILROADS 


r.'iiewerl  af  certain  dates.  Alllmutrh  this  experiment 
ii.is  lasted  since  1.S35,  the  nnnistry  considered  that  it 
needed  a  new  lease  of  life. 

h"rei,t,dit  rates  tor  pit  coal  were  increased  from  i  to 
J  centimes  per  ton  kilonuter  by  tarifT  Xo.  61.  which 
replaced  tariff  No.  31.  The  convention  of  Belgian 
manufacturers,  on  Xoveinher  29.  1911,  entered  a  pru- 
te-t  against  this  increase  in  a  series  oi  resolutions  from 
which   we  (|uote  the   following: 

"The  state  is  managing  its  railway  lines  from  the  sole 
point  of  \iew  of  making  them  serve  as  purveyors  to  its 
insufificient  resources.  It  is  opcratnuj  in  defiance  of  rules 
essential  to  the  prosperity  of  all  eomniercial  enterprise. 
without  any  rational  accounts  of  such  a  nature  as  will 
tend  to  keep  it  fully  informed  as  to  net  cost." 

In  view  of  this  resolution,  toward  the  close  of  1911, 
the  conclusions  in  the  1907  report  of  M.  Hubert,  com- 
nnttee  reporter  of  the  railway  budgtt  for  the  third 
iniie.  are  evidently  as  true  to-day  as  they  were  then: 

"The  management  of  the  Belgian  state  railways  has 
committed  itself  to  a  fiolicy  of  political  expediency  whicli 
is  sacrificing  the  general  interest  to  interests  purely  local 
nnrl  electoral." 

"The  personnel  is  too  large,  ill  paid,  unwisely  -.  lected. 
and  works  overtime." 

"Passenger  service  is  both  lacking  in  comfort  and  verv 
slow." 

"hrom  the  standpoint  of  rates,  passenger  service  is 
favored  at  the  expense  of  the  shippers.  The  department 
rcjnidiates  all  responsibility  for  the  acts  of  its  employees 
or  the  failure  of  its  equipment." 

53 


WHERE    AND    WHY    ITIilir    ( »\\  X  KKS  1 1 1 1'    HAS    I-AH.EI) 

"Far  from  trying  to  meet  it-  f)atroiis  half  way,  the 
Railroad  department  maintains  rates  which  are  purely 
arbitrary,  and  shows  itself  violently  opposed  to  any  pos- 
sible competition." 

Finally,  as  simkesman  of  the  Central  Railway 
Division.  M.  Hubert  concludes : 

"It  will  become  necessary  to  do  what  has  been  done  in 
Holland, — viz.,  lease  the  railways,  with  conditions  at- 
tached to  the  lease  safeguarding  the  rights  of  enii)loyees 
and  the  interests  of  passengers.  And  it  is  certain  that 
private  enterprise  would  derive  far  better  results  from 
our  immense  railway  resources  than  the  government  has 
been  able  to  do.  It  is  advisable  that  this  outcome  be  seri- 
ously considered,  since  future  possibilities  indicate  that 
such  a  course  is  unavoidable,  if  expenses  continue  to 
increase  at  the  same  rate." 

Yet  French  engineers  are  unanimous  in  praise  of 
the  skill  with  which  the  Belgian  lines  are  managed  by 
the  minister  of  Railroads  and  his  distinguished  co- 
workers. 


I 

i 


54 


CHAPTER  III 


PRUSSIAN    RAILRJADS 

I.  Governmental  Distrust  of  the  Railroads. — Obstacle  En- 
countered by  Bismarck  in  11  is  Attempt  to  Organize  an 
Imperial  System. — Government  Railroads. — The  Real- 
ity of  Prussian  Railroad  Profits. 

J.  Railways  and  Waterways. — Divirting  Traffic. — Prussian 
Railways. —  [discrimination  Aj;ainst  the  Rhine  and  Rot- 
terdam.— Contradictions. 

3.  Prussian  Railway  Rates. — Political  Methods  of  Concilia- 
tion.— Berlin's  Milk  Supply. — The  Ticket  Tax. — Rate 
Increase. — Bag,u;aRe  Rates. — German  and  British  Rail- 
ways.— Express  Train  Delays. — Rate  Discrimination 
the  Rule. — Comparison  of  Rates. — Lack  of  Responsi- 
bility.— Insurance. — Arj^uments  in  b'avor  of  Prussian 
Railways.— Complaints  and  the  Ministerial  Reply.— 
Claims  for  Damages.— Operating  Ratio.— Employees  of 
Prussian  Railroads. 

I.  In  Germany,  as  everywhere  else,  the  railroads 
inspired  mistrust  in  the  various  state  governments. 
There,  also  as  everywhere  else,  the  credit  for  their 
initial  construction  belongs  to  individuals.  Up  to  1843 
the  railroads  received  no  subsidy  whatever  from  any 
of  the  federal  states.  General  state  aid  was  withheld 
until  about  1845,  '^^'hen  a  policy  of  government  rail- 
ways was  introduced.  In  1850  a  number  of  states 
took  over  certain  lines  which  were  struggling  under 
pecuniary  embarrassment. 

55 


m 


ever,   to   Drevont    c,  i  "*"  ''^■''"'c,  h..\v- 

"n-Ier  fo„,      u'l"'  ""'  ^>-^'""-  ""^cr„|„,|„„siv 

are  .hose  of  Als.ue-I.orr^  e      p     ..;:'•"•  '""»■".■•■'  ''"« 
possess  onlv  li,,,.,  „f  „       ,'       "*•""  conipanics  now 

the  ratavs  of  V:  L"     ,       """'";    '"^  -1"--^ 
rcn-ler   i„„,self   nCll         .'''"""■  '"'  '""''"'  '° 

"-t ..  ho  had  r  .„  'r  ■'" '"  ""■  ''"•^^'"••■" 

The  govern„K.„,     a.      Cl    "l"'''"^  '"   '"'  '''^■"■■^•■•'■ 

"f  Pultinr  an  cn<l  >  ,  ^"''™ ;'■'"■■  ;."l<'ni  was  one  way 
-.er.  r4a.K::  '::;:""  -'  "^^^■-'>-  ""-^  ^har. 
•■■™-'  ■nsmn.en,.  ::;;;,a  '  e  Wnr^f;!"-  P™'- 
^nimenl  in  that  capacitv     I',,  "'™  R"^" 

56 


PRUSSIAN    KAILIMADS 

'^''     522% 

'^3    4.W<7o 

'f^*"    g.j67o 

'«9'    6.75% 

'f>oo   f,j<7% 

"'"5    7.,.,% 

"^   47H% 

^909   5.947c 

The  lowest  pcrcciita.ijc  was  4.68  [kt  cent,  in  1883, 
1)111  the  opcratin,-,'  expenses  ineludetl  no  capital  charges 
on  the  railway  debt.  If  interest  at  3  per  cent,  were 
nuiuded.  and,  if  a  small  sum  for  a  sinking  fund  were 
added,  the  profits  would  fall,  for  the  period  1881-1895, 
to  J  per  cent.,  and  for  i8()7-i9o6  to  .^.y^  per  cent, 
(iernian  government  railways  are  exempt  from  all 
general  ta.xation  and  are  taxed  locally  only  to  the 
amount  of  i.ioo  francs  per  mile,  whereas,  in  Great 
Britain,  the  local  taxation  is  more  than  5,250  francs 
per  mile. 

1  he  cost  of  constructioM  of  German  railways  has 
not  been  very  heavy.  'I'he  north  of  (icrmany'is  en- 
tirely flat.  Not  a  pingle  tunnel  is  to  be  found  there. 
'Ihe  cost  per  mile  in  1907  was  about  277,121  marks, 
while  the  average  cost  in  Europe  was  336,000  marks. 

2.  It  is  customary  to  speak  very  glibly  in  France 
of  the  harmony  existing  in  Germany  between  railways 
and  waterways. 

An  article  which  appeared  in  the  Rc7'nc  dcs  Deux 
Mondcs,  in  igo2.  entitled  Lcs  Voics  Xavuiablcs  dc 
I'Allcmagnc.  by  Alfred  Mange,  and  two  articles  en- 
titled I.c  Rhin  Allcmaud.  published  by  Paul  Leon,  in 
the  Revue  de  Paris,,  on  the  first  and  fifteenth  of  Feb- 

5; 


i 


WUKKK    AN,.    w.iV    rviUA,    OUXKKM.,,.     „,s    KAH 


FD 


I'ltst  assertions 

raruc.    both    the    ra.lway    l,„cs    an.I    the    watcruavs 
^Wa  north  and  .,„,h  course.     It  .s  not  alone  Jn  "n 

.mc.     Xearly  every  one  of  these  rivo  crossc  several 
.  a  es    .hose    interests    are    fre<,ucntly    .han.Sv 

n  .     "'^'     '"^"^'^'""^^  ^--"'Petcs  with  the   IW 

Ma      ralvvays.    h„t    the    ra.hvays    of    P.a.len.    of    the 
f  a  at.nate  and  o,  .Msace.  says  M  Man^e.  favor  na 

f^.'-|n  the  upper  Rhniehy  greatly  r^hue.;  rats    : 
ran-h.pment  and  transit,  in  order  that  shippur^  nnv 

.ediverte     fronuh..  Prussian  hues.     The  s '  l,e  ^^  ^ 

on  of  affairs  exists  in  tiie  ease  of  the  h:ihe.      in  its 

mv   r  course  ,t  competes  with  the  Prussian  l,ne>.  and 

ZZ:;r  ^"^"-^^  '^   '^   '-■-''  'y  ^'-  -'->-^  of 

When  railways  thus  favor  ports  .f  transship,^ent. 

they  are  not  moved  by  an  aUruistic  svnipathy  for  the 

-p  companies,   hut  entirely  by   theiV  c.nce'ption  o 
^1        own    interests.      The   government    railvvays    of 
Pnissia  have  estahh-shed   rates   to  fight   such   prfvate 
companies  as  still  manage  to  exist.     U'hen  the  Rhine 
was  navigable  only  as  far  as  Mannheim,  the   I  aden 

o':::;;  in'.l^-^'f  "'^1  ''-'-  ^^  ^^^^  °^  transshipmet" 
opened  in   i8,.,,   for  the  purpose  of  diverting    in  its 

s:l:;  S'  t;"'^'^"  ^^^  ^'^"*^"  traffic';..!::^ 

th  Main  ;  ,  '  '^''''■'?"  ^^-'•""^ent  made  use  of 
he  Main  to  bring  ,ts  railroads  into  connection  with 
he  ports  of  .he  North  Sea,  and  to  avoid  nJa'ing      e 

'"  ^'^"^^'^"  •■^''^•-y^-     The  por.s  of  Riesa  and  Dres- 

58 


rkrs>iA\   i<Aii,K()Ai)S 


'Ini  were  otahlislR'd  at  the  expense  of  the  railroad^ 
'  t  Saxoiiv,  that  <.i  \us>i,<,r  at  the  expense  oi  the  rail- 
n  ;i(l  In.iii  \ii^sij4  t"  'l'ei)ht/:  that  of  ietsehen  and 
Lauda  at  the  expense  of  the  Austrian  Xorth  We^t 
railroad;  in  v.t.  h  and  every  case  to  (hvLrt  traflie  from 
Prussian   raihuads. 

M-  l-eon  iias  outhned  the  coniphiated  stru.L^^lc  'if 
ihe  t'rus-iau  railroads  a-^ain.-t  the  na\  i^ation  of  the 
K:iine.  The  differential  tariffs  estahlidicd  in  i8(i^  are 
-till  employed  hy  the  .state,  and  not  tacitly.  IjuI  openly. 
A  circular,  on  thr  ;,(Mh  of  Octol.er.  1SS4.  estahhshed 
the  theory.  The  end  in  view,  it  say^.  is  to  "facilitate 
ihe  importati-n  of  tirst-class  material  and  the  e\p(.r- 
■  iii'Mi  of  the  products  of  nalii.nal  industry,  as  well  as 
1'  protect  the  commerce  of  (ierman  ports  against  the 
p'  rts  of  II.. Hand,"  In  order  to  divert  from  Rotter- 
dam products  of  the  iron  and  steel  industrv  the  gov- 
iriiment  doe-  not  hesii.,ii'  even  to  he  incoherent. 

"The  Prussian  railway."  says  M.  Leon,  has  not 
contcnteil  itself  witii  opening  the  Wostphalian  mar- 
kets to  its  mariiime  ports  hy  rate  reductions,  hut  it 
has  closed  them  to  Rhemsh  ports  hy  raising  the  trans- 
shipment rates  upon  those  lines  which  lead  to  them. 
In  order  to  divert  from  Rotterdam  to  Bremen  the 
cottons  destined  for  Derend.^rf.  6  kilometers  from 
Diisseldorf.  the  railway  charges  10  marks  50,  or  ly 
pfennigs  pel  ton  kilometer.  To  divert  the  iron  of 
Westphalia  from  Rotterdam  a  ten-ton  load  pay.s  from 
Ilagcn  to  Hamburg,  a  distance  of  388  kilometers,  7^ 
marks,  or  1.8  pfennigs  i>er  ton  kilometer.  From 
liagcn  to  Dasseldorf.  or  59  kilometers,  the  railway 

59 


;W.^..nMrks30....-5.,pfen.ng,p.rtonkilo- 
•Y^-')   '■'  the  khin.only   i.^narks  ,s  ,,.,,,1  ,-,.  f-.r  -is 

roll  H .  ;r  r„;:r  T'"'  "  '^-•^"•""  ^"^"  -■- 

'Hic    I>rn.s,an    railways    favor    navi^al,,,,,    on    the 
UK}    (klucr   to   tlK'    Inmticr.      .\l   the   same-   time    in 

u  UKx  ritu.c  t.)  Kuhrort  or  to  Dus>Mori 
I  iicn  there  are  iiinier-il  r-.t.-  (  r,  •  .  '•-"»• 
.     1  -  ""'Hral   r.ite.N   for   Ravaria     ron   nnH 

1^-    rate,  .or  Sw.tzerlancl.  petroleum  rates  foWu^ 
temhcr^r.  s„Ipiu„-  rates  for  Xurenil.ur^,.   etc 

he  exceptional  tariffs  of  the  Prussian  system  af- 
fect 63  per  cent,  of  the  total  kilon.etric  tonnage  and 

^.r::::;:;^  "^  '''''  ''^-^'^^  ^^^  ^^e  Prussian  ste 

ihcir   a\era.n:e   rate   is  2.6   pfennigs,   instead   of    s  i  r 

pfennigs,  the  regular  tariff  f.g.-.re  ^    ' 

rhe  chamhers  of  con.nerce  of  the  Rhen.sh  cities 

protested  agamst  such  discrimination,  and  the  cham- 

60 


PRUSSIAN     KAI,  KOADS 


licT  of  conmu-rce  of  Duisburp  scorcl  [\u-  pnhcy  o{  the 
i'russiaii  riiilwa}^  in  tlif  follnwiiig  terms: 

'•\\c  admit  ir-'i  every  group  piirMir.  uiiii  ,  lu  r^v  tlic 
•  li'fci'.wc  of  if;  (,\vii  interest^:  w  i  'io  not  .i.Iniil  lliatMuli 
a   iHjlicy   may    hide    hchiiid    lin'    ii;,'  leaf    of    iiatiunal    iii- 

IllfSt." 

Siic!i.  when  <-\aniMU'd  in  ik'tail.  arc  tlic  fact  which 
iillcrlv  coiitrn(Hct  the  iei^eiid  .,;'  haniMnc  hetweeii 
tlie  i'ni.,.sian  state  rail\va\s  and  the  uateruavs. 

3.   In   the  Journal   of   I'olitical  Iuo)iotiiy.  of   Hii- 
eago,  Hiij;o  Meyer  lias  eited  a  fact  which  snows  how 
accommodating  it   is  ])ossiI)Ie   for  a  government  rail- 
mad  to  be.     The  rate   npon  milk  had  been  so  esta!)- 
hshed  as  to  prevent  any  sliipment  of  milk  to   P.erlii. 
ironi  a  distance  greater  than  75  miles.     .\s  a  result  of 
I  his  tariff  the  milk   supply    for  the  capital   wa;    con- 
eentrated  within  an  aver.i-c  radius  of  50  miles.     This 
rate   was   established    in   the    interest   <>f   the   Brrlincr 
Milch  Central,    founded  by  members  of  '.he  Asocia- 
tion  of  Farmers   i  P.und  der   I.andwirte),   one  of  the 
uiost  powerful  political  leagues  of  Germany.     In  order 
to   conciliate   this   organization,    the   government    re- 
mained deaf  to  the  ojinplaints  of  the  retail  merchants. 
A  plan  was  foriued  to  bring  milk  to  Berlin  from  Den- 
uiark  by  tank  cars.     The  government  declared,  how- 
ever, that  milk  was  not  among  those  articles  for  which 
transportation  in  tank  cars  had  been  provided;  and  it 
imposed    such    conditions   and    such    fi.rmalities    that 
the  originators  of  the  scheme  were  compelled  to  give 
up  the  attempt. 

61 


WHERK    AM)   WHY    PUHUC 


OWXKRSIIIP    HAS    FAILED 


Tlie  Irussian  government  acts  upon  the  principle 
tliat  It  IS  not  necessary  to  obviate  "the  natural  disad- 
vantages of  the  distant  producers."  According  to  this 
rule,  m  the  interest  of  the  market  gardeners  of  Paris 
and  ,ts  suburbs.  Parisians  should  be  forbidden  to  con- 
sume or  at  least  should  be  made  to  pay  exorbitantly 
for  the  fnuts  and  vegetables  coming  from  the  south 
or  from  Algeria. 

The  Prussian  railways  have  a  fourth  class,  lacking 
in  almost  every  comfort;  although  the  average  length 
ot  travel  m  the  third  and  fourth  class  is  from  20  to^4 
kUometers  (  r.s  to  15  miles).  In  1^07.  during  a  tem- 
porary embarrassment  of  the  Inulget.  the  government 
a.d  a  duty  upon  railway  tickets  and  abolished  return 
tickets  on  all  German  roads. 

In  the  di.scussinn  over  the  budget  of  1911-191^  the 
niniKster  ,,t  JMnancc  described  the  effect  of  ilie.e  inno- 
vations on   the   Prussian   railroads.      Thev   had   pro- 
diicc<l  a  reduction  in  the  amount  of  first-class  travel 
the    total    receipts    having    fallen    from    2:!.2;oooo 
francs,  in  1905.  to  20.125.000  franc.,  in  1909.  wiule 
m  the  way  of  norma'  development  of  traffic    an  in- 
crease  e.pial    to   this    reduction   of   3.125000    francs 
nnght  have  been  looked  for.     There  was  also  a  reduc- 
tion in  the  amount  of  second  and  third  class  favel  and 
a  drop  from  'he  third  class  into  the  fourth  class,  which 
IS  exempt  from  taxation.     Third-class  passengers  were 
paying  a  rate  50  per  cent,  higher  than  the  fourth  class 

while   first-cla.s   passengers    were   paving    300   times 
more.  »    '     to    o        liiwca 

In  Belgium  and  Germany,  since  1907.  the  railways 
have  not  carne<l  any  free  baggage.     During  a  journ  v 

62 


PRUSSIAN    RAIl.ROADS 

in  Germany  my  traveling  companion  and  myself  had 
each  to  pay  in  round  numbers  loo  francs  for  our 
tickets;  but  to  this  aum  must  be  added  nearly  60 
francs  for  the  40  kilos  (88  lbs.)  of  baggage  of 
my  traveling  companion,  and  more  than  y2  francs 
for  my  50  kilos  (110  lbs.).  This  additional  charge 
raised  the  cost  of  transportation  in  my  friend's 
case  33  per  cent.,  and  in  mine  40  per  cent.  When  the 
price  ot  tickets  upon  German  lines  is  compared  with 
those  upon  French  lines  it  is  necessary  to  take  into 
account  the  30  kilograms  (66  lbs.)  of  exempt  baggage 
allowed  the  traveler  on  the  latter. 

The  charge  on  all  che>.ked  baggage  has  another  in- 
convenient aspect.  It  drives  the  traveler  to  carry  by 
hand  as  much  baggage  as  possible.  Such  a  practice, 
of  curse,  crowds  the  carriages  and  incommodes  the 
passengers.  This  condition  has  made  necessary  a 
new  rule,  applied  with  rigor  in  Switzerland,  forbid- 
ding a  passenger  to  bring  into  railway  carriages  bag- 
gage exceeding  specified  weights  and  dimensions.  Ed- 
win Pratt  ^  (luotes  a  letter,  which  appeared  in  the 
Dally  Telegraph,  of  February  22,  1908,  signed  by  an 
Englishman,  Mr.  VV.  A.  Briggs,  who  had  lived  in 
Germany : 


"The  service  is  only  half  as  frequent  as  ours  and  the 
fares  only  a  trifle  lower.  They  have  been  raised  twice 
during  the  last  few  years.  If  anyone  thinks  that  a  gov- 
ernment runs  railways  for  the  benefit  of  the  publi*^  he 
is  much  mistaken.  Goods  (freight)  trains  are  both  in- 
frequent and  notoriously  slow.     Urgent  goods  are  not 

'  Railways  and  Nationalization. 

63 


WHKRK   AXn    WHV    .UBUC   OVVNEKSHIP    „.s    PAILK,) 
'XTognizclnnk's.  one  pays  .louMc  trriH 


sioiis  are  uiikiiow 


i;,'lil.     CI 


"■■'I'  exrur 


"iMiially,  the  rcl 


\\i 


gilt 


tape 


who  rides  past  liis  stati 


is  atrocious.     At 


ly  unfortiinati 


ence  and  fined  (>  si 


iilhngs  on  the 


ion  is  inuk-ted  i.:  the  diff 


available.     If  you  overload 


pounds  for  a  few  hund 


goods 


'^pot.     A'o  c: 


er- 
xciises  are 


^•veiling  to  empty  a  rulley.     Jj 


redweight  put  in  on  a  dark 


wagon  you  are  fined 


winter 


fo 


reed  and 


with 


yuu  are  made  tu   f 


cinurrage  is  relentlessly  en- 


ct-d  that  you  are  deal 


permanent  government  officials  who  do 


ing 


lot 


straw  for  your  eopvpnicnr-f»      t  ^         i     .  &*■-  " 

-..  »o„.  L.  s,.:s^-t  ,iaX^i:  z:'i°i.! 

J.y  express  ll.c  Iransporlalion  of  nu-rchandise  re 
lu.res  „„c  ,lay  f„r  shi,,,,,,,,  f„rn,ali,ies,  an     t  ,,'' 
l<>  transport  ,t  300  ki|„„ic-,or.s  (,8-:i-,  n,    " V 
part  thereof.  h„,vev.r  s„,all  tlte    r'ac.  o"      Th.,?      7 

trom  1  arts  to  La^al.  a  d.siance  of  30,  kii„,„clcrs  ( ,88 


Retort    0,1    Raihcays   in    Cc 


Nicholas   R 
7,  1909  (Cd.  4f 


rmany,    hy    C.    II.    P 


^eynt,cns,    for   tl.o    \W,u\   of   Tnule    Conf 


See  for  tl: 


carson    and 
■rcncc,  June 


wnvs 


til 


c  ^tTie.s  of  disc 


and  the  /■ 


le  collection  of  Marchr  I 


ussioiis  conccrninp  tlu-  P 


'■"'^^ian  rail- 


■ur  C. 


number  for  N 


"inu'v-ilc  (irs  Ch 


ovcnihcr,   ion 


"".""■'',■'•'  \'y  Art'v.r  Raffalovich 
cr.  among  others,  tht 


nniiis  ( 


Jc  I 


64 


PRU.SSr.W    RAn,RO.\DS 


Special  tariffs  arc  the  rule  in  ricrinaiiy.  'I'liey 
form  a  collection  of  015  volume;,  which  cost  from 
^  pfennigs  to  ('»  marks  each.  Seven  hundred  and  eight 
are  devoted  to  merchandise.  i_'0  to  live  stock,  367  to 
coal.  This  great  variety  of  rates  drives  the  shipper  to 
commission  houses  and  insurance  agents  for  informa- 
tion and  protection. 

Ordinary  merchandise  is  not  considered  as  wrapped 
unless  it  is  contained  in  strong  wooden  hexes,  or  verv 
solid  hampers.  I'nless  he  complies  with  these  condi- 
tions the  German  shipper  is  forced  to  sign  a  decla- 
ration that  his  packages  are  either  not  wrapped,  or 
are  insufficiently  wra])ped.  in  order  to  relieve  the  rail- 
roads from  all  responsibilitv. 

Although  by  slow  frcght  the  ton  kiloineier  of  mer- 
chandise pays  to  the  Pru>sian  state  railways  an  aver- 
age rate  of  4.59  centimes,  while  in  l'>ance  it  is  4.57 
centimes,  do  not  l)e  deceived  by  the  .02  centime  dif- 
ference, which  is  due  in  part  to  the  bulk  and  long 
hauls  of  heavy  and  cheap  comnKvlities ;  and  also  to  a 
custom  of  grouping  which  brings  together  merchan- 
dise of  various  sorts  and  ships  it  in  full  cars,  thus 
saving  the  railroad  dci)artment  expenses  of  handling. 
The  department  disclaims  any  responsibilitv  whatever, 
the  shipper  having  to  insure  himself  with  some  com- 
j)any.  Moreover,  in  order  to  discourage  future  claims, 
the  department  imposes  a  tax  of  i  mark  on  each  com- 
plaint. 

When  British  and  German  railwav  rates  are  com- 
pared it  is  usual  to  forget  the  short  distances  covered 
by  the  British  rate,  an  average  of  35  tn  40  miles. 

Edwin    Pratt    is    my   authoritv    for   the    following 

65 


WHERE    ANM)   W  H  V    VVhLW   OWNFRSHTP    US    FMi.En 

typical  example  of  the  tactics  emplov-d  l.v  tin-  parti- 
sans of  railway   nationalization  in  Great   Britain 

Mr.  William  I<ield,  a  member  of  the  Railway  Na- 
tionalization Society,   fcniiidecl  in   1907  ,„  the   Tnited 
K'ngclom,   published,  durin^j^  the  same  year,   ,     nam- 
P^ilet  entitled.  The  Natioualhation  of  Irish  Railz.av^- 
Defects  of  the  Present  System.     In  it  he  has  rcp'ro- 
duced  a  little  table  previously  published  in  a  tract  of 
the  Fabian  Society  in  i8.>9,  and  born. wed  onginalK- 
from  a  work  by  Sir  Bernard  Samuelson.  published  in 
i«85.     \et  the  fallacies  on  which  Sir  Be--iard  Sam- 
uelson s  report   was  mainly  based   had   ah   ady  beca 
thoroughly  exposed  in  tlie  same  vear  in  which  i-   .vas 
issued  by  the  late  Air.  j.   Cnenson.  .general  manager 
of  the  Great  Western  Railway,  in  the  appendix  of  his 
book,  Raihvay  Rates,  Enylish  and  Foreign. 
Grierson  says: 

''Sir  B.   Samuelson 's  report  contains  many  errors  of 
detail.    Comparisons  throughout  have  been  made  without 
due  regard  to  the  conditions  attaclung  to  the  rates,  or  to 
the   dilTerent   circumstances   under   winch   the   traffic   is 
carr  eci  .In  almost  every  instance  Sir  B.  Samuel- 
son  has  taken  the  lowest  rates  in  Germany,  Belgium,  and 
Holland,  winch  are  applicable  only  to  full  tru<-k  K.uls  of 
5  and  10  tons    and,  in  some  cases,  viz.,   Belgium    to  a 
minimum  weight  of  8  cwt.     These  he  has  u.cd  iorV, 
purposes  of  comparison  with  English  rates  for  any  quan- 
tt  es  oyer  500  lbs.  ...     In  some  instances  Sir  B.  Sam- 
ue  son    ,as  not  included  in  the  foreign  rates  the  charge 
for  loading  and  unloading.  .  .  .    Such  are  some  examplL 
of  the  errors  vitiating  the  comparison." 

66 


I'Rl.  SSIAN     RAILROADS 


Now,  even  though  accurate,  22-yeai'-ol(l  rates 
woukl  have  no  value.  \'hcn  they  are  applied  t  >  Irans- 
pcrtation  (jperated  under  conchtions  altogether  differ- 
ent 'hey  are  used  either  in  ignorance  or  bad  faith. 

Lord  Avebury,  in  his  book.  On  Municipal  and  Na- 
tio^uil  Tradiny,  says  of  the  German  railroads: 

"It  is  a  mania  to  harp  on  the  cheapness  of  German 
rates.  Dr.  Benmcr,  editor  of  Stahl  und  Eisen,  has  cal- 
culated that  liie  transportation  charges  in  England  are 
lo  per  cent,  of  the  total  cost  of  producing  iron,  as  against 
23  per  cent,  in  Germany." 

M.  Kaufman,  in  his  remarkable  work  upon  the 
Politique  Fran(^ais  en  Matierc  dc  Chcmins  de  Per,  op- 
posed to  the  refusal  of  the  Prussian  government  to 
lower  the  rates  of  transportation,  "because  of  the 
financial  situation  of  Prussia."  the  reduction  upon 
c\press  rates  accomplished  in  France  in  1892.^ 

In  1909  the  German  Ccntra'rrband,  numbering 
representatives  of  the  largest  industries  of  Germany, 
expressed  its  discontent  with  the  fact  that,  while  pri- 
vate companies  were  reducing  rates,  the  Prussian  gov- 
ernment lines  were  raising  them.  In  the  discussion 
over  the  budget  of  1911-1912  Deputy  Mano  said: 

"For  forty  years  I  have  followed  the  fluctuations  in 
the  rates  on  merchandise.  During  prosperous  years, 
when  industry  and  the  railrcds  are  thriving,  the  depart- 
ment says:  "Your  business  is  all  right,  therefore  you 
have  no  need  of  rate  reductions.'     In  times  of  depression 

'  See  Yves  Guyot,  Trots  .tns  au  Ministcrc  d'^s  Travaux  Publics. 


WUl-HK   AM,    UIIV    IHliLlc    inVXKKSIi.,-    I. AS    KAII.Kl) 

it  answers:     'Hnsiness  is  as  I.a.I  for  tl,.  railroads  as  for 
you;  therclorc  we  cannot  reduce  the  rates.'  " 

T"   the   ah.n-c   criticism   the   minister  ..f    Railr.KuIs 
contented  himself  with  the  reply  that,  as  the  increase 
in    tlie   capacity   of    the    cars    uUmduce.]    within    late 
years  had  sensibly  diminished  the  net  c(;st  of  trans- 
IK)rtation.  the  time  had  not  yet  come  to  consider  a 
general  reducti.,n  of  freight  rates.     In  any  case,  '-Rate 
reductions  ouyht  not  'o  he  hased  upon  fmancial  results 
favorable  to  operation.      Rate  reductions  can  be  con- 
sidered  only    when    the   annual    revenues    shall   have 
reached   such  a   sound   basis   as   to  olifer  a   sufficient 
guaranty  against  unfavorable  vears." 

Let  us  see  what  this  sound  basis  of  annual  revenues 
is:  The  profits  of  the  railways  were  fonnerlv  used 
to  pay  the  interest  on  the  g<nernment  debt,  of' which 
88.4  per  cent,  in  1899,  82.38  per  cent,  in  190;.  74  7  > 
per  cent,  in  1909  was  caused  by  the  railroads 

Ll>  to  1910  the  Prussian  general  budget  received 
nearly  the  entire  net  earnings  of  the  railways,  with 
.nsecunty,  instability,  and  trouble  in  the  whole  budj,  t 
situation  as  a  result.  In  ,907  the  net  earnings  fell 
below  the  preliminary  budget  estimate  by  96.000000 
Irancs  and  in  1908.  190.000.000  francs!  For  1900 
on  the  contrary,  following  a  pressure  of  freight  trlf- 
hc.  (fie  receipts  impmyed  by  i.^o.ooo.ooo  francs  This 
nnproveuent  was  due.  in  part,  to  an  actual  saving  of 
25,fX)o.ooo  francs.  *' 

According  to  a  report  for  the  preceding  year  the 
increase  of  trafiic  during  the  period  between 'the  lirst 
cf  April  and  'h.    .n,l  .f   Xov  ,nber.    1910.  was  597 

68 


PRrsSIAX     KAll.KOADS 


I 


l.cr  cent,  for  passenger  traffic,  and  7.34  per  cent,  for 
trcif^ht,  or  an  averaj,a-  for  all  traffic  of  6.66  per  cent. 
Railway  receipts  are  dependent  upon  the  economic 
activity  of  the  country.     As  a  compensation   for  this 
contingent    and    disturbing   dement    in    the    Prussian 
I'ndget  It  was  decided,  at  the  beginning  of  1910,  that 
«nit  of  the  protlts  available  after  paving  for  interest 
and  the  amortization  of  the  railroad  debt  there  should 
be  devoted:     first,  to  the  special  budget  of  tne  rail- 
njads,  1. 15  jxT  cent,  at  least  upon  the  reported  capital 
of  the  system,  or  actually   150.000.000  francs   ($28.- 
500.000)  ;  second,  to  the  general  state  budget,  in  order 
tn  make  up  its  deficits.   2.10  per  cent,  of  this  same 
capital,  or  275.000.000  francs  ($52,250,000). 

'I  he  surplus  was  to  be  devoted  to  a  regulation  (or 
compensation)  fund  destined  to  complete  the  pay- 
ments to  the  general  budget  in  the  bad  vears.  when 
tne  net  income  would  not  be  sufficient  to  meet  fully 
the  above-mentioned  payment  of  2.10  per  cent,  to 
the  general  state  budget. 

M.  Friedberg  (a  National  Liberal),  before  the 
Chamber  of  Deputies,  and  U.  de  Gwinner.  director  of 
the  German  Bank,  criticized  this  reform  before  the 
nppcr  chamber.  Looking  at  the  situation  from  the 
[H'int  of  view  of  a  state  budget  with  a  deficit,  obliged 
'-'  have  recourse  to  a  loan,  probably  to  a  tax,  they  de- 
manded why  so  important  a  special  rai'road  budget 
should  be  constituted  at  all.  The  Minister  of  Finance. 
M.  Lentze.  observed  that  every  year  the  railroads 
demand  reconstruct ir.n.  improvements,  additions,  roll- 
nig    stock,    transforation    of    secondary    lines'    etc 

69 


I  •;l 


i^^ 


\\IIIKE   AND    WHY    PUBLIC   OWNERSHIP    HAS    FAILED 

'either  tlie  railways  must  live  on  their  resources  or 
tiicy  must  have  recourse  to  a  loan.  The  state  budget 
will  he  protected  from  excessive  Huctuations  in  receiv- 
ing' 2.IO  i)er  cent,  of  the  capital  in  support  of  the 
general  hudget.  I'.jr  1910  it  was  due  to  receive 
35.000.000  francs  ($6,650,000). 

The  ministerial  plan  was  adopted. 

The  operating  ratio  was  61  per  cent,  in  1900-  it 
ro.se  to  74.62  per  cent,  in  1908.  M.  Lentze  considered 
It  a  trmmph  when  it  fell  to  68.99  per  cent,  in  1909,  to 
68.50  per  cent,  in  1910.  It  was  computed  at  6863 
per  cent,  tor  191 1.  The  Minister  of  Railways  asserted 
that,  m  face  of  growing  demands  on  the  part  of  em- 
ployees and  of  traffic,  another  rise  must  be  antici- 
pated. 

Despite  the  high  operating  ratio  certain  economies 
have  been  criticized.  Naturally  the  department  has 
been  reproached  with  not  having  treated  its  employees 
fairly.  Its  answer  has  been  that  60  per  cent,  of  the 
total  expenditures  of  the  railroad  are  absorbed  by 
employees.  Thirty-seven  thousand  employees,  or  12.3 
per  cent,  of  the  total  number,  are  earning  from  1,875 
francs  to  2,250  francs  a  year,  and  86,000,  or  29.2 
r'*r  cent.,  are  earning  from  1,500  francs  to  1,875 
francs.  Six  thousand  new  positions  were  created  in 
1912. 

In  Prussia  the  aoministration  is  strong  and  Parlia- 
ment is  weak.  Therefore  it  is  the  minister  who  says: 
"Our  action  will  continue  to  be  energetic  with  regard 
to  those  groups  trying  to  foment  ag'taiion."  The^De- 
partment  of  Railways  Jealously  guards  its  employees 

70 


PRUSSIAN    RAILROADS 

from  any  spirit  of  disorder  capable  of  bringing  about 
a  strike.  As  for  the  employees  they  are  bound  by 
the  clauses  in  their  contracts,  which  cacli  man  reads 
and  signs,  to  hold  theriselves  aloof  from  all  agitation 
hostile  to  order. 


71 


CIIAPTHR  IV 

STATP,   R.„UVA^S   or  AISTR.A    AN'O    H^GARV 

I  nvatc   Kntorprisc  ^  •^"•"r.— Supenurity  of 

'iient  (.wild  r.i  ^^  ,„.r        .       /   ,         ^^  '''^  ^^"vcrn- 
iS--     1,  ''-   •''^  "^■"^-  "^  tin-  railu-av  lines      In 

l'"'ce  ,n  ,X„„  i,  ,„,„,,,  „  '  "^ '•     r..,lua.vs, 

"P""--nt  „l    \,„irh  U-,      I  ,  "'^  ™'""""c  <lcvd- 

I>"  ce„t.  of  ,he  line.,:  in   ,8,0    if-,      "■"''    '^'-^ 
'"  1007.  s.or  per  cent      P   i  .u  ''  '''''  ''^"t.,  and. 

72 


STATE    kAILV.  ANS   Ol-    AI.>I1<1A    AM)    Iltf\GARY 

•  if  tilt'  slati-  raii\v;i\  ,  has  not  |)ai(l  expenses,  atid  lias 
liecM  a  l)nnl.ii  iijx.n  the  'I'reasury       File  lack  <>(  receipts 
is  chielly  due  to  low  ireij^dil  rates. 
(  harles  Lee  Rajier  says: 

"They  (the  freijjht  rates)  liave  heen  much  hijjhcr  than 
ill  the  I'nited  States.  tlu)nf,di  the  eliarntcr  of  the  trattir 
nl  the  two  eoiiiitrie  Iia-  Iiad  ■iiueli  in  eomnion.  I'.otli 
liave  had  a  lari,^'  vohiiiie  of  the  low  j^^radc  commodities.  It 
would,  therefore,  seem  to  1>l'  f.iir  to  say  that  the  .Austrian 
state  service  ha.-,  not  heen  notahly  successful  in  its  cheap- 
ness." 

The  superiority  of  pr  ale  enterjirises  in  .\ustria 
has  been  estahlished  hy  an  investij^^ation  conducted  by 
the  iiritish  I'.oard  of  'I'rade.  h'our  private  companies 
have  never  had  to  resort  to  a  i,niar;uitee(l  reserve  fund. 
Durint,'  the  period  kjoj- K^of)  one  <>i  tlieni  (hd  not 
earn  dividends  on  its  capital:  the  second  earned  from 
4  iier  cent,  to  5.J5  per  cent.,  the  third  from  3.4  per 
cent,  to  6/)  per  cent,  while  the  fourth  earned  from 
II  per  cent,  to  1  _'  per  cent.  And  all  these  c<jmpanies 
pay  ta.xes  to  the  state. 

2.  In  1S80  Minister  Haross  estalili.shed  the  zone 
system  in  llunjj^ary.  P.itter  adversaries  of  the  mileage 
(paliers)  system  were  enthusiastic  over  the  idea  of 
introducinj:^  the  zone  system.  'Idle  zones  are  only 
more  extended  units  of  distance  than  the  10  kilo- 
meter (6  miles)  section  of  the  rari.s-Lyons-Mediter- 
ranean  railway  line  of  hVance — a  privately  owned 
line.  The  introduction  of  the  system  was  sitnply  a 
political  move,   f(jr  the  real  object  was  to  attract  to 

73 


MICROCOPY    RESOLUTION    TEST    CHART 

ANSI  and  ISO  TEST  CHART  No    2: 


.0 


I.I 


1.25 


la  _ 


1.4 


II  2.5 
I  2.2 

zo 
1.6 


^     .APPLIED  IIViHGE     Inc 


■  53   East    Mam    street 
■    Chester.    Ne«    York         U609       USA 
' '  6)    482  -  0300  -  Phone 
•a)    288  -  M89       "a. 


WHERE    AM)    WHY    PUBLIC    OWNERSHIP    HAS    FAILED 

Budapest  those  Hungarians  who  hved  in  the  far  cor- 
ners of  the  land,  in  order  to  make  them  admire  the 
capital,  and  thus  give  them  an  exalted  idea  of  the 
greatness  of  their  country.  In  1896.  at  the  time  of  the 
Millennial  Exposition,  the  railroads  carried  lor  noth- 
ing, and.  I  understand,  lodged  and  fed  entire  families 
at  Budapest.  However,  as  a  species  of  compensation 
for  its  com|)laisance  in  thus  accommcxlating  the  coun- 
try-folk, the  railroad  had  increased  the  price  of  tickets 
for  short  distance  traffic  during  the  preceding  year. 

In  1903  other  changes  took  place.  As  it  has  failed 
to  yield  the  anticipated  results.  Hungary  recently,  in 
large  measure  at  least,  has  abandoned  the  system 
introduced  by  Baross. 

The  average  receipts  per  passenger  per  kilometer  in 
six  European  states  have  been:  (One  heller  equals 
$0,002.) 

Hellers 

Hungarian  railways   2.9 

Austrian   railways    2.8 

Prussian  railways   2.8 

Bavarian    railways    3.0 

Holland   railways   3.4 

Roumanian  railways   4.4 


. 


Financial  returns  upon  the  Hungarian  state  railroads 
were  as  follows  ( in  i  ,000  crowns ;  i  crown  ecjuals  20 
cents)  : 


Capital 

1888     984.785 

1898     2,042.613 

ifW6    -'.402,775 

1908     2.527.^K^ 


Surplus 

37.074 
8.^.850 

I  15.54.3 
91-493 


Interest 
at  4% 

39.391 
81.704 

101,114 


Net 
Surplus 

-2,317 

2.146 
19.432 
-9.621 


74 


STATE  RAILWAYS  OF   AUSTRIA   AND   HUNGARY 

The  service  upon  the  state  lines  of  Hungary  during 
late  years  has  given  rise  to  numberless  complaints: 
lack  of  comfort,  insufficient  rolling  stock,  too  frequent 
delays,  and  numerous  accidents.^ 

The  former  secretary  of  the  ministry  of  Commerce, 
Joseph  Szterenyi.  in  an  address  delivered  before  the 
Chamber  of  Deputies  in  191J.  stated  that  from  1890  to 
u)09  the  number  of  passengers  on  the  railways  had  m- 
creased  about  300  per  cent.  During  this  peri,  d  there 
have  been  years  in  which  the  increase  of  trattic  has 
corresponded  to  the  increase  in  the  number  of  cars 
in  the  following  ratios:  9.5  per  cent.,  as  against  2.5 
per  cent;  8  per  cent.,  as  against  4  per  cent.;  10.6  per 
cent.,  against  0.5  per  cent. :  9  per  cent.,  agamst  0.5  per 
cent.,  and  even  11  per  cent,  against  o.i  per  cent. 

The  available  number  of  locomotives  is  even  less 
satisfying.    While  the  volume  of  traffic  has  increased 
about  51  per  cent,  the  number  of  locomotives  has  m- 
creascd  only  about  21  per  cent.     In  1909  it  was  esti- 
mated that  606  more  locomotives  would  be  necessary, 
in  order  to  take  care  of  the  normal  traftic.    A  number 
of  locomotives  then  in  use  were  over  35  years  old.    Al- 
though passenger  traffic  has  increased  in  liudapest,  at 
the  eastern  terminal  about  550  per  cent,  and  at  the 
western  terminal  about  900  per  cent.,  and  although 
frei'^ht  traffic  has  grown  approximately  100  per  cent., 
it  is'^onlv  recently  that  any  particular  effort  has  been 
made  to  improve  the  conditions  mentioned. 

From  1865  to   1907  the  operating  ratio  increased 

'Der  Zonentarif  dcr  Vn^arischcn  Staatshahncn.  hy  Rudolph 
Rcmcngi.  IQU,  publi^lu-ci  hy  J.  Bcnko.  Biulapest.  Discussed  ui 
ihc  Journal  dcs  EconoimstiS.  July,   Kjii. 

7.^ 


WHERE   AND    WHY    PL-BLIC    OWNERSlIll     HAS    FAILED 

from  55  to  yy  per  cent.,  and  amounted  to  80.6  per 
cent,  in  i()o8. 

Beginnini,^  with  1893  the  cost  of  labor  has  increased 
by  leaps  and  bounds.  In  1904  the  employees  went  on 
strike  and  stopi)ed  the  trains,  assertinj^  that  the  in- 
crease of  salary  voted  by  the  Chamber  of  Deputies  was 
too  small.  Two  separate  awards  of  an  increase  in 
salary,  the  one  in  1904  the  other  in  1908,  have  brought 
the  total  amcjunt  to  _'j.ooo,ooo  crowns. 

Following  changes  in  the  locomotive  service  in 
1906  there  has  been  an  increase  in  the  consumption  of 
coal  of  ab(nit  13  per  cent.,  representing  4,000,000 
crowns,  and  eciualing  a  work  increase  of  30  per  cent. 

Maintenance  expenses  of  locomotives  and  cars  give 
the  following  figures:  per  locomotive,  in  1905,  3,003 
crowns,  and,  in  1909,  4,530  crowns:  per  passenger 
coach,  from  640  to  820  crowns :  per  freight  car,  from 
96  to  134  crowns.  The  working  efficiency  of  the 
average  car  has  fallen  from  48  per  cent,  to  t;j  per 
cent. 

In  1909  the  excess  of  receipts  over  expenditures 
was  less  by  43,000.000  crowns  than  the  sum  neces- 
sary for  interest  and  sinking  fund  charges.  The  zone 
system  has  recently  been  altered,  in  the  hope  of  realiz- 
ing more  than   15,260,000  crowns.' 

^Journal  dcs  Transports,  September  2^,  1912, 


76 


CHAPTER  V 
ITALIAN    RAILWAYS 

X.  Purchase  of  Italian  Railways.-Operation  by  Private 
Comnanics.-Govcrnment  Interferencc.-The  Law  ot 
Tun  '2,  lOO^.-Extent  of  the  ItaUan  System-Ltforts 
ii  M  Bianchi.-Railroad  Accounts.-Furnishmg  I--m- 
plovmcnt.-Waste.-Labor.--Opcratin|  Ratio -^^^ 
Special  Tariffs  and  Commodity  Tanifs  -Fa^ors.  1  ar 
liamenlary  Control,  and  the  Position  ot  the  Minister. 

At  the  outset  Italy  was  induced  by  political  motives 
to  become   a   railroad   proprietor.     Before    i860  the 
lines  were  onlv  local.     After  the  adoption  of  the  con- 
stitution  of   the   kingdom,    the   state   bought   up     he 
.tock  which  was  owned  by  Austria  in  the  tjorthern 
Railways,    and    took    over    the    issue    of    the    ^e- 
ferred   stock   to   continue   the   construction   of   then. 
But  the   government  had   no  capital   at  its  disposal, 
and  had  i^^essing  financial  needs.     In  .865,  therefore^ 
a  law  directed  the  sale  of  the  state  lines  to  pruate 
companies.     Two  hundred  million  hre  ($38,000,000) 

was  realized  by  the  state  from  the  sale 

The  existing   system  was  distributed   among   four 

companies,  known  respectively  as  the  W  est    the  Kast. 

the  North  and  the  South,  but  the  division  of  territory 

between    them    was    lU    defined,    and    they    were    at 

77 


WIIKRE    AND    WHY    PUBLIC    OWNERSHIP    HAS    FAILED 


odds  and  enemies.  Moreover,  the  railways  of  upper 
Italy  proved  to  have  heen  handed  over  to  two  com- 
panies with  neither  resources  nor  credit.  These  lines 
were  therefore  repurchased  hy  the  state  in  1875-1876 
for  jjolitical  reasons,  and  the  state  took  possession  in 
1878.  The  proprietors  of  the  southern  lines  became 
known  as  the  Adriatic  Company  in  1885.  For  a  time 
these  lines  were  not  interfered  with. 

In  1878  3,000  kilometers  of  the  5,100  kilometers 
of  railroad  in  Italy  belonged  to  the  state.  The  minis- 
ters (  Minghetti  and  Spaventa  )  who  had  negotiated  the 
purchase,  had  intended  that  the  state  railways  should 
be  operated  by  private  companies  acting  as  government 
agents.  In  1878  a  new  ministry  appointed  an  investi- 
gating commission  which,  at  the  end  of  three  years  of 
work,  submitted  a  monumental  report  (1881)  con- 
tainmg  the  recommendation  that  the  state  railways  be 
leased  to  private  companies  for  a  fixed  period.  The 
commission  declared  most  emphatically  that  the  state 
ought  not  to  operate  them  itself: 

i.°  Because  the  state  performs  very  few  functions 
with  greater  efficiency  or  at  a  lower  cost  than  private 
enterprise  is  able  to  do. 

2°  Operation  of  railways  by  a  state  is  more  difficult 
than  by  private  companies,  n,  conclusion  cleai 'y  estab- 
lished by  the  investigations  made  by  the  commission. 

3.°  The  state  is  far  more  apt  than  arc  private  com- 
panies to  force  changes  in  industry  rather  than  to  foster 
natural  development  by  offering  more  efficient  service. 

4."  The  danger  of  political  interference  in  the  ad- 
ministration of  the  railroads  is  very  great. 

78 


I 


I 


ITALIAN    KAILWAYS 

The  secretary  of  tlu-  o.mnii^sion  above  referred  lo, 
who  became  Minister  ..i  ['ubl.c  Worlo  in  1SS4.  leased 
the  state  Hnes  to  three  companies,  tlie  Meiblerranean. 
the  Adriatic,  and  the  Siciban.  for  twenty  years,  with 
a  possible  extension  ..f  the  lease.  Of  tli.>  io.cy.6  kdo- 
meters  of  railways  in  Italy  at  that  tune,  (),3^4  Udo- 
meters were  thus  allotted.  In  KJ05  the  system  covered 
12,827  kilometers  (8,017  miles). 

The  companies  had  paid  the  state  275-000,000  hre 
($c^2soooo)   for  their  equipment,  but  on  condition 
that  at  the  expiration    of    the    lease    this    e(iuipment 
sh(nUd  be  repurchased  from  them.     They  guaranteed 
to  devote  the   S  per  cent,   which  the  state  had  been 
paying  on  the  original  loan  toward  the  upkeep  of  the 
equipment.     The  ordinary  expenses  were  to  be  borne 
by  the  state,  the  extraordinary  expenses  by  the  com- 
pany.    This  distinction  provoked  numberless  discus- 
sions. .  J 
A   division  of  profits  between  the  companies  and 
the  state  was  arranged  for.  and  a  reserve  fund  estab- 
lished as  a  provision  for  extraordinary  works.     But, 
after  1884,  in  place  of  an  increase  in  receipts,  there 
was  a  deficit.     Hence  the  government,  instead  of  tak- 
ing in,  was  obliged  to  pay  out. 

In  doubt  as  to  the  future  action  of  the  state  re- 
garding them  the  companies  were  working  under  the 
worst  possible  conditions  in  a  country  dehcient  in  ag- 
ricultural and  industrial  products.  The  taxes  were 
heavy  and  the  returns  small.  Thr-n  among  other 
causes  for  the  decreasing  receipts  was  the  rate  reduc- 
tion imposed  by  the  state  upon  the  c(nTipanies,  ahhough 
theoretically  it  had  no  legal  right  to  propose  such  a 


WIlKRi:    AN-D    WHY    I'UliMC    OVVNKRSIIIP    HAS    FAIl.l: 


stq).  In  the  uid  ii  was  miuircd  t(*  make  ui-  the  .ht- 
ference  which  resuUe.I.  Trans,uutatiMn  had  heui  thus 
ruiiK-d  and  at  the  expense  ol"  the  taxpavers.  IVforenver 
by  cuntinuin-  hs  intervenli.,n  in  the 'tear  of  a  strike 
among  the  railroad  enipl.nees.  the  -(nernment  pro- 
ceeded to  impose  new  hurdens  upon  the  companies,  and 
mcidcntally  intruch.ced  a  spirit  of  m.suhunhnati.Hi 
among  tlie  men. 

Conchtions  were  now  ripe  for  the  Socialists  in  {Par- 
liament, and  they  jiassed  without  much  discussion  the 
law  ot  the  _'_'nd  of  April,  1905,  ordering  the  immedi- 
ate return  of  the  railroads  to  direct  operation  by  the 
state.  This  law  had  been  prepared  bv  a  cmmission 
appointed  m  1S98.  whose  rep.jrt,  in  nine  v.,lumes  had 
apijeared  in  1904-1905.  A  law  of  u)oy  now  provided 
for  the  purchase  of  2,300  kilometers  (1.438  miles)  of 
the  southern  system. 

The  total  cost  of  the  railroads  in  Italy  had  reached, 
m  1907,  niure  than  6.000.000.000  lire.  In  order  to 
rehabilitate  the  system  thoroughly.  Parliament  voted 
a  further  sum  of  910,000,000  lire,  which  had  to  be 
spent  in  Italy  before  1911.  This  made  a  total  of 
6.910,000.000  lire  ($1,312,900,000).  These  Italian 
Imes.  for  each  100,000  sciuare  miles  of  territory,  had 
a  length  of  4.19  miles  in  1875;  5-8  in  1885:  8.8  in 
1900.  and  9.3  in  190708.  when  (^reat  Bri'tain  had 
19.06.  For  every  10.000  inhabitants  there  were  I  7 
mdes  of  Italian  railway  in  i>^y-^.  j.iy  in  188^,  2.9  in 
1895.  and  3.16  in  1907,  in  which  year,  in  the  L'nited 
Kmgdom,  the  figure  was  5.58. 

I'rom   the    very   .nitset    the   di.sadvantages   of   state 
operation    made    themselves    felt.      The    roads    were 

80 


P 


I 


ITALIAN    RAILWAYS 


never  free  from  unwarrantable  political  influence  an(l 
tile  e(iuii)inent  was  woefully  defective  for  lack  of 
proper  supervi.-^ion.' 

It  had  been  expressly  declared  at  the  time  of  pur- 
chase that  the  state  system  should  have  a  manaK^e- 
ment  entirely  free  from  sjjnvernmeiital  and  parlia- 
mentarv  interference.  L' Italia,  on  the  jSth  of  May 
of  the  same  year,  observed  that  Bianchi.  .general  man- 
ager of  the'  state  railways,  manifested  the  utmost 
skepticism  regarding  the  possibility  of  organizing  state 
railway  operation  in  any  etTective  and  po>itive  manner 

in  Italy. 

Ilis'fears  proved  well  grounded.  Among  other  re- 
forms the  department  was  an.xious  to  introduce  a  ccxle 
of  discipline  among  the  workmen  in  its  shops.  '1  he 
deputies,  however,  murmured.  They  took  their  griev- 
ance to  the  Minister  of  the  Interior,  who  referred 
it  to  his  colleague,  the  Minister  of  Pul>lic  Works. 
Ultimately  M.  Bianchi  was  informed  that  it  would 
be  necessary  to  revoke  such  measures  as  he  had 
already  taken.  Naturally,  feeling  themselves  thus 
supported,  the  workmen  redoubled  their  insubordina- 
tion, which  spread  also  ai^nong  the  mechanics  and  the 
other  employees. 

At  the  end  of  a  year  M.  Bianchi  stated  that  the 
affairs  of  the  railroad  were  worse  than  they  had  been 
in  the  beginning.  Instead  of  being  held  to  account 
for  the  g(jod  of  the  service,  he  was  completely  under 
the  thumb  of  all  those  whose  interests  were  opposed 
to  the  real  interests  of  the  railroad,  provided  they 
had  sufficient  intUience  in  Parliament. 

'See  The  Economist.  November  4.  'O'l- 

81 


WHKRK    AND    WHY    IMMillt'    ()\V  \  I'USI  I  1  I'    II  \S    I   \II.KP 


'llic  iKt  rt'tuniN  Ml"  tin-  state  railways,  iia-sin^  (ivcr 
tlu-  vcar  11)05- iijol),  when  cdtulitidiiN  wire  ahiiorinal, 
arc  as   t<  )lli  iws  : 

I'lSi.il  Lire 

IQCV)- 1(;07    4,?.(xx),(X)0 

1007- 1  gc^ 37,ooo,cKX) 

i<X>S- iiX3<i    20,no<),(X)o 

I<XX>  11)10    37,000.000 

The  increase  from  mjoS-kjoc)  to  H)()')-i'HO  is  to 
be  credited  to  l)ookkcei)in<^  artifices  ilesigned  to  con- 
ceal the  real  condition  of  affairs. 

Have  the  itn])rovements  heen  proportionate  to  the 
exjienditures  since  the  passage  of  the  law  autliorizing 
the  ])nrchase' 

The  purchase  was  coincident  with  several  years  of 
econoniic  activity.  Operating  receipts  increased  29 
p-.-r  cent,  in  1905-1906  over  i900-i()0i  ;  11  per  cent, 
in  1906-1907  over  I905-I(p6:  11.5  per  cent,  in  1907- 
190S  over  1906- 1907.  But  this  increase  in  receipts 
was  completely  absorbed  by  the  increase  in  expendi- 
tures. 

Before  1905,  when  a  reduction  was  made  in  the 
rate  of  taxation,  the  companies  were  paying  to  the 
government  65,000,000  lire.  To-day  they  would  be 
paying  80,000.000. 

The  law  of  1909  exempted  the  state  railways  from 
certain  expenses,  which,  according  to  Engineer  An- 
cona,  who  is  also  a  dei)uty,  amounted  to  a  relief  of 
24,000,000  lire.  This  makes  it  necessary  to  reduce 
the  37.000,000  lire — the  last  tigure  in  the  above  table 
— to  13,000,000  lire.  .\  further  lessening  of  the  ex- 
penses for  1909- 1 910  comes  from  a  reduction  in  the 

82 


I 


ITALIAN    KAILWAYS 

char-es  for  renewal  of  ciuipment  of  from  4  T>er  cent, 
of  the  gross  receipts  to  Jl.  per  cent.  1  his  makes 
another  reduction  of  from  H.ow.ooo  to  lo.ooo.ocx) 
hre.  which,  added  t..  the  -'4,000.000  mentioned  above, 
amounts  to  a  reduction  of  from  3J,ooo.ooo  to  34,000.- 
000  hre.  There  were  similar  reductions  in  the  ex- 
penses during  kjio-K)!  i . 

The  state  has  received  no  revenue  from  its  capital 
of  6000.000.000  lire  expended  for  construction,  pur- 
chase, and  restocking  the  railroads.  To  this  sum 
must  be  added,  also.  1,000.000.000  advanced  by  the 
Treasurv  for  their  benefit.  The  railroads  have  been 
paying  interest  and  sinking  fund  charges  on  the  loan, 
but  the  department  intends  to  be  relieved  from  this 
responsibility.  It  has  recently  demanded  30.000,000 
lire  a  year  for  the  purpose  of  doubling  its  hues. 

The  law  governing  the  operation  of  Italian  rail- 
roads recognizes  very  distinctly  that  the  fundamental 
duty  of  state  operation  is  to  furnish  work  tor  the 
national  foundries  and  lumber  yards.  Naturally,  the 
Railway  department  must  fulfill  this  duty  rather  than 
consult^he  real  needs  and  resources  of  the  railways. 

Contractors  bring  all  possible  influence  to  bear 
upon  the  deputies,  who  care  for  nothing  but  public 
opinion  If  there  are  no  orders  there  is  no  work  for 
the  emplovees  for  whom  the  state  is  bound  to  furnish 
work  Moreover,  shutting  down  shops  means  rum  for 
the  manufacturers.  Therefore,  the  minister  orders 
rolling  slock  without  troubling  himself  to  provide  sid- 
ings Whereas,  in  1899.  the  companies  possessed  an 
average  of  62  meters  of  siding  per  empty  car,  the 

8^ 


Wlllkl'.    ANI)    UIIV     IMIil  li      ilU  N'i:|<-ll  II'     MAS    FAILKIJ 


State,  ill  i<)(H)-i<;i(),  lowiTcd  the  pri)|)()rti<>n  to  25.1 
meters,  alth(ni,ij[li  50  meters  had  hceii  cuiiMilered 
indispensable  for  each  of  the  9.000  ears  forming  the 
reserve.  Quantities  of  ears  were  falhtij,'  to  pieces  on 
the  tracks  for  hick  of  use;  nevertheless,  the  depart- 
ment Contracted  fo  •  an  annual  delivery  of  5 'Xjo 
cars.  I'lie  maiuitacturers  persnadeil  Minister  i.uz- 
zatti  to  raise  this  order  to  X.ooo  cars.  The  gen- 
eral budget  committee,  however,  had  the  couragt; 
to  reduce  it  to  4,000  cars,  costing  29,000,000  lire 
($5,510,000). 

Kxperts  have  estimated  that  all  this  expense  might 
have  beeti  spared  by  a  more  rational  use  and  better 
care  of  the  existing  cars;  15  per  cent,  of  the  freight 
cars  are  constantly  under  repair,  and  ^^  per  cent,  of 
the  passenger  cars. 

The  Italian  taxpayers  jiay  a  full  third  more  for 
their  rolling  stock  than  if  they  bought  it  abroad. 
Moreover,  there  is  no  redress  for  delays  in  construc- 
tion and  other  >c-rors  on  the  part  of  the  contractors, 
because  political  inlluence  returns  all  the  tines  pro- 
vided for  in  the  contract.  The  law  says  that  orders 
are  to  be  divided  as  ecpiitably  as  possible  among  the 
various  manufacturers  of  the  same  product.  .As  a 
conse(|uence  of  this  provision  we  find  a  legally  or- 
ganized trust,  although  such  coalitions  are  forbidden. 
Naturally,  this  trust  is  not  interested  in  insuring  an 
economical  expenditure  of  the  state  finances. 

Here  are  some  facts  which  have  never  been  denied 
in  parliamentary  tlebates :  Old  locomotives  repainted 
are  bought  for  new.  Concrete  ties,  which  break  at 
the  passing  of  trains,  and  soft  spruce  ties,  the  objects 

84 


, 


I 


ITALIAN    RAir.VVAYS 

of  useless  attuiipt-^  at  icciilnixi  luciit  w  li  the  aul  ot 
itijia'tiiiiis  III  (.rcD-olc,  arc  Ixni.ulu  l>y  llu-  iciis  ol  thuu- 
sands.  ( )r(kTs  of  15.(100  kiln^ram--  1  _^,'5.ooo  lbs.)  oi 
j,niin  arahif,  joo  kiloiiietcTs  (Ji8,73,^  yards)  of  red 
\clvet,  a  inillioii  straps,  etc.,  arc  recorded,  and 
so  on.' 


Of  course,  labor  plays  an  important  role  in  the  in- 
crease of  expenses,  and  in  Italy,  as  in  bVanic,  the  Rail- 
way department  consiratulates  itself  upon  this  state  of 
affairs,  an  excuse  being  thus  ])resented  for  ever  new 
demands  on  it>  part.  The  report  for  the  fiscal  year 
i()io-Mji  I  says: 

"During  the  period  }C)02-y.^  there  was  an  average  of 
104.833  employees,  lioth  regular  and  s])ecial,  earning  an 
average  of  i.^^)  lire  a  year,  while  in  igio-ujii  we 
have  had,  on  an  average,  1 43. 2(^5  enij)loyees,  includ- 
ing those  engaged  in  repair  work  but  excluding  those  on 
the  navigation  service  lines  in  operation  on  the  16th  of 
hdy,  1910.  with  an  average  outlay  for  each  of  \  ,622  lire. 
If  the  employees  in  i()io-ii  had  been  paid  at  the  same 
rate  as  in  1902-4  the  expenditures  would  have  been 
lessened  by  37,700,000  lire    ($7,163,000)." 

This  might  be  a  regrettable  state  of  atifairs,  from 
the  i)oint  of  view  of  the  railroad  employees,  but  less 
so  from  the  ])oiin  of  view  of  the  taxpayers. 

The  operating  ratio  has  iluctuated  as  follows:  1885. 
67  per  cent.;  1890.  68  per  cent.:  1895,  75  P^r  cent.; 
1903.  68  per  cent.;  1906-1907,  ys  P^^  cent.;  1908-09, 
78  per  cent.     For  distances  up  to  150  kilometers  (94 

'  The  Economist. 

85 


iHa.itnmiif*»iiiiHiMi 


WHERE    AND   WHY    PUBLIC   OWNERSHIP    HAS    FAILED 


miles)  pa  ^enger  rates,  per  kilometer,  according  to  the 
revision  of  1906,  are  (in  lire)  : 


Second  Clasa 

Third  CIms 

8.93 

S.80 

8.12 

5.22 

First  Claas 

Express  trains    1276 

Local  and  other  trains..     ii.6o 


Over  150  kilometer?  the  rate  is  established  by  zones. 
In  the  case  of  slow  freight  the  rate  has  undergone  few 
changes  since  1885,  and  rather  in  the  way  of  an  in- 
crease.^ 

Italian  railways  make  all  sorts  of  rebates  to  ship- 
pers, according  to  the  nount  of  political  influence 
which  the  latter  can  bring  to  bear  Seven  hundred 
and  seventy-six  special  tariffs  have  been  promulgated, 
and  1,509  regulating  clauses  in  favor  oi  special  firms.^ 
As  for  deputies  and  senators  they  have  a  right  to  free 
transportation  for  themselves,  plus  eighteen  compli- 
mentary tickets  a  year,  twelve  of  which  are  sent  them 
without  their  even  having  to  take  the  trouble  to  ask 
for  them. 

There  are  free  tickets  of  every  kind  and  every  color, 
destined  for  functionaries,  great  and  small,  civil  and 
military.  Still  others,  of  a  special  color,  are  reserved 
for  journalists  and  for  people  who  find  it  convenient 
to  claim  that  title  when  traveling. 

The  law  of  1905  established  an  independent  staiif 
for  the  ministry  of  Public  Works,  composed  of  a  gen- 
eral manager  and  a  council,  consisting  at  first  of  six 
members,  but  later  increased  to  eight.     F"ive  of  these 

' Raihiay   Transportation,  by  Charles  Lee  Raper,   1912,  G.  P. 

Putnam's   Sons,   New   York 
'  The  Economist. 

86 


ITALIAN    RAILWAYS 

latter  are  attached  to  the  department  and  three  repre- 
sent the  citizens.  Members  of  Parliament  are  not 
permitted  to  be  members  of  this  council.  The  Mmis- 
ter  of  Public  Works  can  annul  the  decisions  and  acts 
of  the  council,  but  he  cannot  substitute  his  own  mitia- 

According  to  the  nationalizing  party  it  had  "placed 
the  government  railwavs  outside  of  politics."  But  a 
^.ubsequent  law  of  1907  provided  for  a  superior  com- 
mittee of  control,  composed  of  six  senators  and  six 
deputies,  active  members  of  the  two  chambers  of  Par- 
liament, a  proceeding  which  places  the  minister  in  a 
singular  political  situation.  _   . 

In  1907  M.  Giolitti  nominated  a  committee  of  vigi- 
lance, which  was  perhaps  vigilant,  but  which  did  not 
accelerate  the  speed  of  either  passenger  or  freight 
trains  In  a  response  to  a  Parliamentary  interpellation 
he  assumed  entire  responsibility  for  the  unsatisfactory 
condition  of  the  railway  system.  Parliament  did  not 
want  him  to  resign;  therefore,  the  majority  endorsed 
his  administration.  Hence,  we  have  the  following 
peculiar  state  of  afifairs :  _ 

If  a  minister  is  so  satisfactory  to  the  majority 
in  Parliament  that  it  desires  to  keep  him  in  office  it 
must  endorse  all  the  shortcomings  of  his  administra- 
tion. If.  on  the  other  hand,  it  has  a  mind  to  over- 
throw a  minister,  it  may  cause  his  downfall  for  a 
delay  of  live  minutes. 


S7 


CHAPTER  VI 

THE    RAILWAYS    OF    THE    SWISS    FEDERATION.' 

Purchase  Trice  [exceeded  Expectation.— Profit  and  Loss 
Account.— Debt  of  the  Confederation.— Receipts  and 
Expenses.— Operating  Ratio.— Labor.— Economy  at 
the  Expense  of  Passengers  and  Shippers.— Prophecy  of 
Numa  Droz. 

The  promoters  of  the  existing  Swiss  railroad  mo- 
nopoly declared  most  emphatically  that  the  new 
regime  was  not  expected,  primarily  at  least,  to  yield 
financial  results,  hut  rather  advantages  for  passengers 
and  shippers.  The  actual  purchase,  however,  was 
limited  to  the  four  great  systems,  the  government 
passing  over  the  lines  of  secondary  importance, 
which  were  less  productive.  Thus  two  classes  of  rail- 
way service  were  established:  a  first  class,  consisting 
of  patrons  of  the  more  important  roads  and  a  second 
class,  composed  of  users  of  the  small  roads,  which 
could  be  safely  neglected.  The  purchase  price  of  the 
four  great  systems  was  estimated  at  964,000,000 
francs  ($183,160,000).  The  Confederation  has  ac- 
tually paid  1.195,000,000  francs,  or  231,000,000  francs 
more  than  the  figure  first  quoted. 

On   December  31,    191 2,   the   general   construction 

'  See  Journal  dcs  ticononiistcs,  Dec.  15,  1910,  article  by  M.  Fa- 
v.Trgcr,  Nov.,  1912.  The  L.3test  Accounts  of  the  Federal  Rail- 
ways, July,  1913.     The  Revised  .Accounts  of  1912. 

88 


THE    RAILWAYS    OF    THE    SWISS    FEDERATION 

account  amounted  to  i  .47-'.ooo-000  francs,  to  which 
must  be  added  r>^24-ooo  francs  representing  divers 
cxi-en^es.  reduced  l.v  sinking  funds  to  28  177.000 
francs  The  t<.tal  amount  of  capital  sunk  is  therefore 
I  '^00.469.000  francs  ,  $2S5,o8.,,ooo).  This  does  not 
inchide.  however,  the  cost  of  the  St.  Gothard  hne. 

ExchKhng  the  St.  (gothard  hne,  the  proht  and  loss 
accounts  are  sh.nvn  in  the  following  table : 

Francs 

,,      .,  1.030,682 

190.3  ^''ofi^   f,o,73S 

^w    ,,    •■■;; 651.733 

'905    ^,     4.828,523 

1006  2  S54.206 

'■^7       '.       .'..'.'.'.'.'.'.....     2.854,074 

1908  Deficit   •  •  ••••••• 6.630,301 

^909  1. 53^,000 

1910  ;,575,ooo 

1911  Profit   9,226,000 

1912  "       

The  cost  of  the  St.  Gothard  line  has  exceeded  by 
U  000,000  francs  ($6,460,000)  the  provisions  of  the 
estimate  of  1897.    The  expenses  for  completed  works 
and  new  acpiisitions.  which  on  December  31.   IW 
alreadv  amounted  to  _m8.ooo.ooo  franco,  had  jumped 
in   191-  to  292,000.000  francs,  or  74,000.000  francs 
more,  ^and   at   that   time   there   still    remained    unhn- 
ished  works  to  the  extent  of  69.000.000  trancs.  while 
expenses  in  the  near  future  for  other  lines  are  m  sight. 
ancMinting  to   aln^ost    100.000.000   francs.      In   their 
;eport  to  the  budget  of   1912  the  board  of  managers 
of  the  Federal  railroads  stated  that  they  were  anxious 
to  reduce  the  vcarlv  expenses  by  24.000.000  francs, 
but  such  a  reduction  is  out  of  the  question. 

89 


WHERE   AND    WHY    PUBLIC    OWNERSHIP    HAS    I  AILLl) 

The  capital  st<»ck  (.f  the  four  old  companies  was 
280.000,000  francs  ($53,000,000).  The  dividends 
paid  to  stockholders  had  heen  reduced,  or  altogether 
discontinued,  during  the  losing  years,  in  order  that 
the  interest  upon  the  outstanding  .lebt  might  be  paid 
In  the  case  of  the  state  railways  there  is  only  one 
stockholder,  the  state:  and.  if  its  railways  lose  it  i. 
the  state,  that  is  to  say.  the  taxpayers  as  a  whole,  who 
must  make  up  the  deficit. 

^   In   1903   the  consolidated   debt   was    1,075,152000 
.rancs.     In  1900  it  had  risen  to  1.344,221.000  francs. 
On  December  31.   1912,  it  had  again  increased  3C99 - 
000,000  francs,  or  ^y  per  cent.     The  interest  on  the 
debt,  which  was  36.000,000  francs  in  190^.  amounted 
to  54.000,000  francs  in   1912.     Sinking  fund  charges 
on  the  capital   invested    in  the  enterprise   n^se   from 
4.300.000  francs  in  1903  to  7,840,000  francs  in  1912. 
The  surplus  should  have  been  transferred,  at  least 
HI  part,  to  a  surplus  fund.     But  the  department,  con- 
sidering the  unreliability  of  future  operations,  has  re- 
fused to  put  in  force  the  provisions  of  the  law  gov- 
erning the  purchase,  and  has  simply  carried  it  over 
Some  special  expenses,  represented  by  no  actual  value 
such  as  abandoned  installations,  etc..  were  still  car- 
ried on  December  31.  1912,  to  the  amount  of  28000- 
000  francs  ($5,320,000).     As  long  as  this  balance  is 
not  disposed  of,  it  is  out  of  the  question  to  talk  about 
surplus  of  receipts. 

The  annual  appropriation  of  special  funds,  to  de- 
fray the  expenses  of  maintenance  and  renewals  not 
already  covered  by  operation  in  1906,  was  7,084.000 
francs.     In  1912  it  was  9,3-'5.ooo  francs. 

90 


THE    RAILWAYS    OF    THE    SWISS    FEDERATION 

There  has  been  no  miscalculation  in  regard  to  re- 
ceipts. They  were  estimated  on  the  basis  of  an  aver- 
age annual  increase  of  3  per  cent.  The  increase  has 
been  4.8  per  cent,  for  passengers  and  4.5  per  cent,  for 

freight. 

During  the  last  three  years  the  gross  earnings  have 
jumped  from  174.000.000  francs,  in  igoQ.  '^  joo,- 
000,000  francs,  in  19 12.  or  18  per  cent.  Rut  these 
earnings  will  be  reduced  after  the  opening  of  Uie 
Loetschberg  line,  and  as  a  result  of  the  St.  Gothard 
agreement,  which  has  just  been  accepted. 

Moreover,  the  expenses  of  operation  have  increased 
on  an  average  of  6.2  per  cent.,  conseciucntly  at  a  pro- 
portion greater  than  the  receipts,  up  to  1908.  Smce 
1909  this  proportion  has  decreased.  The  operatmg 
ratio  appears  as  follows : 

1903  65.5.1% 

1904  67.68% 

1905  f-^5 

1906    67.40  /o 

1907  69.22% 

1908   7^  82% 

1909   70.3^^ 

1910   65.28% 

1911    64.26% 

1912   66.76% 

During  the  same  period  the  highest  operating  ratio 
of  the  Paris-Lyon-Mediterranean  line  of  France  (op- 
erated bv  a  private  company)  was  53.5  per  cent. 

In  1909  the  secretary  of  the  department  observed 
that,  taking  into  account  the  increase  of  interest, 
extensions,  and  all  those  charges  which,  at  the 
beginning  of  1912.  bore  so  heavily  upon  the  railway, 

91 


VVIIERK   AXD   WHY    rUBIJC   OVVXERSHIP    HAS    FAILED 

the  annual  increase  in  expenditures  would  ultimately 
reach  20.000.000  francs.  This  Near  (  1()1t,)  it  has 
lieen   11,270.000  francs. 

After  i()oC).  followinc^  an  averai::e  rise  in  wages,  to- 
gethcr  with  an  increase  in  the  nunil)er  of  employees, 
the  ordinary  lahor  expcn  es  of  the  railroad  exceeded 
hy  ..\.2^nnno  francs  the  figure  of  the  preceding  year. 
Beginning  with  .\pril  i,  1912.  a  new  law  concern- 
ing salaries  went  into  effect,  which  has  brought  about 
an  ann.ual  increase  of  8.200.000  francs  in  the  ex- 
penses, without  counting  supplementary  payments 
to  be  made  in  the  way  of  pensions  and  sick  and 
other  benefits  established  on  the  basis  of  full  pay. 
Nor  does  it  include  the  increase  in  the  salaries  of 
laborers  paid  by  the  day.  The  total  increase  is  esti- 
mated at  10,000,000  francs. 

From   T904  to  iQio  the  increase  in  labor  expenses 
was    14,370.000    francs,    or    51    per   cent.       For    all 
other   expenses   the   increase   was   only   36   per  cent. 
In     1902    there    were    23.030    employees;    in     1907 
the  ntnnbcr  had  risen  to  31.300.     On  the  1st  of  April 
the  tri-yearly  rise  in  salary  t;;v)k  effect,  as  provided 
for  by  a  law  fixing  higher  maximums.     This  law  has 
increased  the  annual  ex])enses  by   10,000.000  francs. 
\\  ith    the    object    of    balancing    the    expenses    in 
favor  of  the  employees,  certain  economies  were  ef- 
fected at  the  expcn.se  of  passengers  and  shippers,  such 
as  withdrawal  of  reduced  fares  on  holidays,  decreased 
inspection  of  the  road,  fewer  trains,  speed  of  freight 
trains  lessened,    a    certain    number    of    improvements 
postponed,   and   resistance  to  demands    for   improve- 
ments which  were  not  too  urgent.     Finally  the  de- 

92 


THE    RAILWAYS    OF    Till-:    SWISS    FEDERATION 

partmcnt  determined  to  increase  the  rates  when  the 
in(Uistry  and  commerce  of  Switzerland  are  already 
paying  internal  transportation  taxes  double  those  in 
force  in  neighboring  countries. 

The  nationalizing  of  the  Swiss  railways  has  cer- 
tainly proved  of  advantage  to  the  emi)l(n-ces.  But, 
are  state  operati  "s  carried  on  for  the  benefit  of  em- 
ployees or  for  the  public?  Present  conditions  justify 
the  following  prophecy  of  Numa  Droz : 

"Through  this  purchase  our  railroad  policy  is  in  course 
of  stiflFening  into  a  set  of  rigid  regulations  prescribed 
by  a  poverty  stricken  department  incapable  of  solving  the 
great  problems  of  the  future  for  lack  of  resources." 


93 


CHAPTER  VII 


RAILWAYS    OF    NEW    ZEALAND 

Capital  Charges.— Receipts  and  Kxpenditurcs.— Xct  Op- 
erating rrnfits.— Deficits.— Interest  on  the  Debt.— Pre- 
dominance of  I'(jlitical  over  Rconomic  Considerations. 
Causes  of  the  Deficit.— .Advanc  ment  According  to 
Seniority.— "The  Government  Strike."— Theory  of 
Operation  at  a  Loss.— Profits  from  State  Mines  At- 
tained  Only  at   the   Expense  of  the  Railroads. 

In  i860  the  first  railway  of  New  Zealand  was  con- 
structed l,y  tlie  pnnincial  ijovcrnment  of  Canterbury, 
to  connect  'he  town  of  Clu-istchurch  with  the  port  of 
Lyttclton,  separate*!  from  it  by  a  chain  of  high  hills. 
In  1863  the  provincial  ccnincil  of  Auckland  and  Drury 
conceived  the  idea  of  extending  the  line  to  Wellington. 

The  capital  then  and  subsecjuently  sunk  in  the  rail- 
ways of  New  Zealand,  amounting,  according  to  the 
accounts,  to  £27.762.592  ($135,203,823^  on\he  first 
of  March.  1909,  is  far  from  representing  the  whole 
expense  of  the  project.  £1,289.840  ($6,281,520),  the 
cost  of  lines  not  yet  opened  on  the  3ict  of  March, 
1909,  should  have  been  added  to  this  sum.  The  total 
amount  would  thus  reach  £29.052,432  ($141,485,343). 
Moreover,  no  account  was  taken  of  the  interest  paid 
on  the  capital  sunk  in  lines  not  operated  during  the 
thirty-nine  previous  years. 

94 


RMLVVAVS    OK    NEW    ZKAI.ANl) 

Before  1882  the  amount  of  thr  deficits  can  only  be 
surmised;  since  that  date  they  ..ave  aKgrogated 
£4.500,000  ($-'i/)iS.OOo).  The  tntal  capital  invested 
from  1870  to  190c;  has  been  about  £40.000.000  ($194.- 
800,000).  of  which  £23..^o5.oo9  (.$1.3.495.000)  was 
paid  out  of  borrowed  money.  The  rest  has  been  raised 
by  the  sale  of  public  land.  and.  above  all.  by  the  aul  of 
taxes — direct  or  indirect. 

Since  1895  the  capital  cost  per  mile  of  open  line  has 
risen  from  £7703  to  £io.35'-    Tins  increase  is  due  in 
part  to  improvements  upon  the  roadbeds.      In  order 
to  explain  further  such  an  increase  in  cost  it  is  sau 
that  the  country  of   New   Zeulanci   presents   unusua 
difficulties-that  it  is  sitnate<l  far  from  the  industrial 
centers  of  the  world,  and  that   construction  is  on  a 
small  scale.     We  might  add  that  railway  cmslruction 
is  considered  as  a  species  of  national  workshop,  de- 
signed to  give  emplovment  to  laborers  out  of  work; 
that  none  of  the  modern  mechanical  methods  are  em- 
ployed:  and.   finally,  that  "the  work  is  done  by  the 
government  and  not  by  private  contractors. 

The  gross  earnings  of  the  railways  increased  from 
£1.150,851  in  1895  to  £2.929.5-^6  in  1908-1909.     But 
the  expenses  rose  in  even  greater  proportion.      1  hey 
increased  from  £732.160  in   1894-1895  to  £2.114.^1.-, 
in  1908-1909.     And.  if  there  had  not  been  a  reduc- 
tion of  the  rate  of  interest  on  government    oans.  the 
deficit  of  1909.  based  on  the  "capital  cost"  of  the  open 
lines,  would  have  been  £323.555.  instead  o    £212.408. 
The  railway  statement,  presented  annually  to  1  ar- 
liament  by  the  Minister  of  Railways,  always  shows  a 
•  Stave  Socialism  in  New  Zealand,  page  7-'- 


IIIUI-.     \\ 


"    U  IIV    ITi;i  i(     ( 


'W.NKKSllll'    HAS    lAIl.i; 


'H't  UMrk,ni;prMnt,-u„l„,„!  .,nv  ,.i.!>.annn  that  this 
pn-lit  IS  alua>>   m.uffiunit   t..  pav   tli.    iiUc-rcsl   npn,, 

he  cost  of  o.,Mnu-,^.,  a,  ,hc.  avcra,.  ,::,.  nf  inu-L 
'''",     ''>    "'^"  .^"vtrnnirnt  „,„,n  the  puhhc  .M.t 

'"•r-n^^  thr  yrar  .n.ln,^    Manl,    ^,.    ,,,„,    (ho  rail- 

tal  o  i-.;^.,,,,,,  ,^,, -_,,,,  ^^_,,  j,^^  ^^^^^  ^^.  ^^^^^_ 
|;'nui,.,n  n,  the  .p.,,  .,„,.  lu,,.  suuc  the  avcra.^e 
rate  .,     .ntorct  paul  ,  .„   ,he  p„l,hV  dd.t   was   ^.7  per 

ccn..  the  -net  prnlit-'  ,.  ah.. -hed  ,n  interest  paunents, 
and  a  dehcit  amounlin-  m  iji.-.^^.s  (SiouTio) 
emer^^es.  if  interest  i.  recknne.l  ,.„  the  cost  of  the 
open  hues  ,,nlv.  I!„t  real  cost  of  construction  incUtdes 
the  cnst  01  tile  unopened  hues,  niakin-  a  total  of  £  ^9 - 
0:v.'.43-'  (sSi4i.4S;.^^4_,),  reducin-  the  -net  proht"  ti. 
'.NO  per  c.nt..  and  -nrreasin-  the  deticit  hy  £jGj,yOo 
UM. 279,64,).  It  ihe  interest  upon  the  open  lines 
nnly  ,s  considered  the  t.,tal  deficit  from  iSSj  to  1909 
■n  nuiid  nuinhers,  ,.  £4.500.000  (  <^_>i.9i  ;  000) 

l>ut  as  a  matter  of  fact,  acconlm.^r  to  the  conditions 
of  US  investment,  interest  at  the  rate  of  4  per  cent, 
should  have  heen  paid  ,.n  the  railway  debt.  In  such 
case  the  dehcit  in  190S-1909  would  ha^•e  heen  for  both 
classes  of  hues  £,M7.^N6  ( $i.69r.7r,o )  ;  while  the  total 
Jlehcit  since  iS8i-i8S_>  would  prohahlv  am<n,nt  to  at 
least  iS.ooo.ooo  ($35,160,000).  and  perhaps  £,0.000.- 
000  { $48.700.000 ). 

The  dt-ficit  is  due.  above  all.  to  the  principal  line  of 
he  South  Island.  i._n)9  nnles  hmg.     The  political  in- 
fluence ot  this  part  of  Xew  Zealand,   formerlv  much 
.i^reater  than  it  is  today,  contributed  to  the  unprofit- 
able railway  constructi(;n  in  that  territory.     Sir  Joseph 

96 


RAILWAYS    OF    NKW    ZKAI-ANU 

Ward,  li<)\vcvt.r,  in  cxplaininjj;  in  I'arliament  the  defi- 
cit on  tile  lines  of  the  snulhern  province,  ainionnced 
that  the  line>  of  the  northern  province  would  pres- 
ently need  repairs,  and  that  these  lines  would  present 
in  time  to  coini'  the  --anie  deficiencies  a>  tiie    ithers.' 

Such  accounts  as  these  show  the  necessity  of  reck- 
oning un  lari^e  sums  for  rei>air.s.  Moreover,  as  the 
Minister  oi  Railways.  Hon.  J.  A.  Millar,  said,  in 
1909: 

"The  enhanced  i)rice  uf  materials,  iiicrea'^ed  rates  of 
wages,  and  expenditures  incurred  on  the  works  enumer- 
ated (track  renewals)  have  had  a  marked  effect  on  the 
maintenance  ex])enditure,  which  has  steadily  increased 
during  the  past  10  years." 

Inirther,  the  public  is  exacting,  and  the  government 
must  sacrifice  econcjmic  considerations  to  those  of  a 
pcditical  nature.  Since  1895,  according  to  Sir  Joseph 
Ward,  rate  1  eductions  have  reached  £850.000,  while 
the  value  of  increased  train  service  h;.  risen  to  iii^T,.- 
000.  This  reckoning  takes  no  account  of  the  conces- 
sions in  pay  given  to  the  railway  staff,  which  amounted 
to  another  £375.000. 

.\lihough  from  1895  to  1907  the  salaries  of  railway 
employees  were  increased  £375.000  ($1,826,250) 
the  Amalgamated  Society  of  Railway  Servants  com- 
plained that  they  were  receiving  lower  salaries 
than  those  paid  by  private  companies,  while 
their  hours  were  often  much  longer  than  would  be 
tolerated  in  any  private  business  subject  to  the  juris- 
diction of  the  Arbitration  Court. 

'  July  26.  1907.     State  Socialism  in   New  Zealand,  p.  74. 

97 


WIllKi;    AM)    win     I'llilK     (i\\ MKSIllI'    HAS    lAU.KD 

Tlie  causes  of  tlu-  dcfitil  on  tli''  r.iilw.iv^  riro  : 

1.  lilt'    coiistriution    uf    lino    in    inlvancf    uf    require- 

ments. 

2.  'Ihe  iiii;li  eost  of  all  lines. 

3.  Deiavs    in    cuii>trui  tion,    primiiially    dne    to   l.'iek    of 

funds. 

4.  I  nprotitalile     eonre>-ion>     in     service,     fares,     antl 

freif(lit. 

5.  Rij;;i(l   sy-teni   of   rates. 

6.  High  eovt  of  operation  ;ini|   niaiutenanee,  o\vin<^,   in 

part.  10  a  eertain  la.k  of  cli.scipliue,  initiative,  and 
cffieieiicy   in  tlie   r;iii\vay  service. 

One  ot  the  most  serion-  e;uises  of  ineftkieiicv  is  the 
system  ot  promoti,,n,  whieli  i^  based  principallv  on 
seni(;rity  in  point  of  .service,  in  the  hope  of  abitlishintr 
tavoritism  and  other  abuses. 

Government  employee.s  have  often  been  accused  of 
niakins.,'  use  of  the  so-called  "t^^ivennnent  strike."  The 
K^eneral  manaj^er  of  railways  wrote  a  letter  in  1(^09  to 
the  chief  meclianical  en.^ineer  at  tiie  Addington  work- 
shops, making  .serious  charges  of  inetticiency.  But, 
when  the  investigating  committee  assembled  at 
Christtiuirch  on  March  11,  kjlh).  that  same  general 
manager  made  a  pitifid  recantation,  ^'et  the  inves- 
tigaticjn  had  clearly  demonstrated,  among  other  filings, 
the  ditticulty  of  discharging  useless  men:  of  finding 
capable  men  to  replace  them  when  discharged:  the  lack 
of  encouragement  of  skilled  labor  because  of  the  ab- 
sence of  all  (jjjportunity  for  advancement  or  increase 
in  salary:  the  utter  absence  of  initiative  sho"  n 
by  the  superintendent  oi  the  workshops  and  the  lack 

98 


K  \l\.\\\\  >    III'     M\V    /I    \1    WD 


<u  u|)-ti>-(iatc  .'ippliaiurs  in  (crtaiii  lim's  ,,\  wiirk.  Ilie 
Imard  (ii  iinjuirv.  tlu-  iliairiiian  ii|  wliuli  was  a  disliii- 
Ljnislufl  (.'in^inciT,  l'nil\'s-.(ir  U.  J.  Scitt,  i<i  (  atitcr- 
luirv  ( '<  illi'^f,  arri\i'il  at  tlu'  iniulusii  in  ili.ii  ila-  cust  of 
pn  i(lii(iiiiii  was  ^^nalcr  at  Atldiii^tDii  than  in  private 
\\(irk>liiip>,  ainl  tlial  the  aiiMUiit  '■{  prctdiiclion 
was  relatively  nnicli  less  in  prnportiun  ;.i  the  miniher 
ui   hands  employed. 

The  Evening  Post,  cf  Wellington,  said  on  June  17, 
1909: 

"Here,  in  miniature,  we  have  the  evils  depicted  which 
are  rampant  more  or  less  in  everv  Itranch  of  the  puhlic 
service;  and,  if  the  result  is  that  at  Addin^ton  we  are 
])ayinfj  fnjm  t,o  to  (xd  or  70  per  cetU.  more  for  the  work 
done  than  it  would  cost  us  elsewhere,  it  is  natural  to  in- 
fer that  the  puhlic  service,  as  a  whole,  is  also  costing  far 
heyond  its  value." 

For  the  reasons  given  ahove  and  a  number  of 
others  tl  e  railways  of  New  Zealand  have  never  earned 
the  full  amount  of  interest  on  the  capital  cost. 

However,  the  state  has  frequently  declared  that 
it  does  not  wish  to  make  the  railways  pay.  That  far 
and  above  such  a  consideration  should  be  placed  the 
service  rendered  to  the  country  in  pr(niding  cheap 
transportation  of  agricultural  products  to  the  markets. 

This  theory  gives  rise  to  two  (|uestions: 

I.  Why  consent  to  recover  3  per  cent,  interest,  in- 
stead of  3.7J  per  cent,  (the  rate  on  state  fr.nds),  and 
why  not,  if  this  theory  be  just,  consent  to  recover 
only  2  per  cent.,  or  even  less? 

99 


WHERE    AM)    WHY    I'UBLIC    OWNERSHIP    HAS    FAn/r:iJ 


'2.  Is  the  system  rendering  all  the  service  that  it 
oiijj^ht  to  render  considering  its  cost  ? 

M(»re<iver.  arguments  hase<l  on  such  a  theory 
have  the  prime  defect  of  lacking  a  just  standard  of 
measurement.  They  are  marked  by  that  vagueness 
which  so  often  envelops  political  conceptions  and  fos- 
ters the  worst  abuses.  They  serve  to  enable  makers  of 
electoral  platforms  and  members  of  the  most  influen- 
tial groups  to  instigate  expenditures  w'hich  weigh 
heavily  upon  all  their  fellow-citizens,  in  order  to  in- 
crease the  value  of  their  own  property.  Thus  they 
make  their  own  political  strength  increase  the  "un- 
earned increment"  so  violently  denounced  by  the  par- 
tisrms  of  nationalization  of  the  ^o.i  and  of  state  opera- 
tion of  railways. 

Messrs.  J.  S.  Le  Rossignol  and  W.  D.  Stewart 
have  demonstrated  very  clearly  the  disadvantage  of 
railway  operati(jn  at  a  loss. 

A  railway  line  is  opened  in  a  country  which  cannot 
support  it.  It  is  therefore  a  j^arasitic  line,  which 
serves  only  to  injure  other  lines,  or  to  be  a  drain  on 
the  whole  bod;v  of  the  taxpayers  of  the  coimtry.  Be- 
cause of  its  cost  it  stands  in  the  way  of  rate  reduc- 
tions and  improvement  in  the  service  of  other  lines. 
It  operates  at  the  expense  of  either  passengers  and 
shijjpers  or  oi  the  taxpayers  of  other  regions. 

How  about  the  development  of  the  country?  But 
railroads  cannot  be  constructed  everywhere.  When 
the  fundamental  rule  is  lost  sight  of,  that  a  region 
ought  to  i)ay  and  to  pay  enough  to  compensate  for 
losses  during  the  first  years  of  operation,  there  can 
be  no  further  limit  to  extravagant  expenditures.     In- 

lOO 


RAILWAYS    OF    NEW    ZEALAND 


I 


deed,  tlie  financial  failure  of  the  railways  lias  been 
one  of  the  chief  causes  of  the  arrested  development 
of  the  whole  system.  It  took  twenty-three  years  to 
construct  a  section  200  miles  lonjr  on  the  principal  line 
between  Auckland  and  Wellington;  and  this  line  is 
self-supporting.  Then  apart  from  the  fact  that  this 
dilatory  method  of  construction  has  added  enormously 
to  the  cost,  it  is  appalling  to  think  of  the  huge  sum 
which  the  country  has  jiaid  in  interest  during  the  con- 
struction, to  say  nothing  of  the  returns  which  might 
have  been  gathered  in  and  the  settlement  which  would 
have  been  promoted  had  the  wcjrk  been  completed 
with  reasonable  dis[)atch. 

The  resulting  interest  charges  on  the  whole  line 
may  be  readily  conceived.  Instead  of  concentrat- 
ing the  funds  upon  one  line,  and  completing  it, 
they  have  been  frittered  away  in  various  parts  of 
the  country,  in  order  to  conciliate  political  groups. 
The  government,  unable  to  borrow  more  than  a 
certain  sum  annually,  was  at  a  standstill.  If,  on 
the  contrary,  it  had  been  given  an  opportunity 
to  finish  the  profitable  lines,  it  might  have  been  able, 
with  the  resources  that  these  latter  would  have  yielded, 
to  pay  the  interest  on  the  capital  already  borrowed ; 
its  credit  wnuld  have  been  improved,  and.  possibly, 
the  resources  thus  at  hand  might  liave  permitted  it  to 
provide  for  interest  t)n  sums  to  be  borrowed  for  the 
further  development  of  the  system. 

Such  a  wasteful  policy,  far  from  aiding  in  the  devel- 
(;])ment  of  the  country,  has  actually  n  tarded  it.  The 
districts  deprived  of  a  railway  have  paid  for  those 
in  other  places,  while  the  slow  rate  at  which  these 

lOI 


WFIKRi:     \\l)    win-    I'L'Hl.IC-    OWXIORSIIII'     HAS    l\II.i;i) 


railr()a(l>  have  been  con/triKted,  together  with  the  ex- 
cessive amounts  which  luive  been  j)aul  out  to  build 
unproductive  hues,  have  deprived  other  districts  oi 
any  hope  of  a  raihoad  of  their  own.  Xew  Zealand  lia. 
at  last  begun  to  conipreliend  that  the  construction  of 
lines  which  do  not  pay  is  "bad  poliev." 

The  government  has  recently  adopted  a  svstem  of 
forcing  the  railroads  to  earn  their  own  interest  on  the 
capital  invested.  Sir  Joseph  Ward,  at  W  inton,  on  the 
5th  of  May,  19 lo.  even  mentioned  the  eoessity  for 
amortization.  "The  time  for  continucii  .K)rrowing  is 
coming  to  an  end,  and  that  of  repayment  is  approach- 
mg. 

Unfortunately  the  government  finds  itself  between 
districts  which  are  demanding  railwavs,  districts 
which  have  them,  and  which  are  demanding  rate  re- 
duction, im])rovements  of  transportation  and  other 
favors,  and  employees  demanding  increase  of  salaries 
and  shorter  hours.  The  department  of  labor  insists 
that  railways  be  constructed  in  order  to  give  work- 
to  the  unemployed :  while  tuiance  critics  demand  that 
the  railways  be  compelled  to  provide  for  the  interest 
on  the  capital  invested  in  them,  and  that  they  earn 
enough  to  pay  for  the  new  lines. 

^'et.  despite  all  the  disadvantages  connected  with 
government  operation  of  railways,  uo  one  dares  sug- 
gest that  the  lines  may  be  leased  to  a  private  company, 
although  a  provision  for  such  lease  exists  in  the  act 
of  IQOO  (section  34),  and  such  a  i)roceeding  would 
undoubtedly  be  the  best  means  of  putting  the  tniances 
of  New  Zeahmd  on  a  s<jund  basis.  It  has  been  sug- 
gested that  the  administration  of  the  railways  should 

102 


RAILWAYS   OF    NEW    ZEALAND 

l)e  confided  to  a  commission  of  exi)erts  who  would  be 
independent  of  the  in'^nences  to  which  pubhc  officiaLs 
are  exjjosed.  J^^ven  this  system,  however,  would  not 
completely  insure  freedom  from  political  interference, 
were  it  only  l)y  reason  of  its  origin  and  the  necessity 
for  its  renewal.  Such  a  commission  is  also  practically 
certain  to  fall  into  ;dl  the  errors  of  a  bureaucracy. 
The  system  has  been  employed  in  the  Australian  states, 
notably  \'ictoria.  and  in  New  South  Wales. 

The  government  of  New  Zealand  is  anxious  to 
make  use  of  the  railwa\s  to  carry  out  a  certain  policy 
relating  to  the  distribution  of  population.  The  "stage 
system"  of  railway  rates  worked  out  by  Samuel  Vaile, 
and  discussed  with  much  approval  in  1882,  was  espe- 
cially designed  to  prevent  the  concentration  of  popula- 
tion in  cities  and  to  keep  it  distributed  over  a  vast 
territory,  by  establishing  very  low  rates  in  rural  dis- 
tricts and  high  rates  in  the  urban  districts.  The  ex- 
periment, hon'cver,  was  never  made. 

New  Zealand  is  developing.  Little  by  little  the 
profitable  lines  have  been  completed,  and  some  abuses 
have  been  more  or  less  checked.  In  fact,  the  govern- 
ment has  gone  so  far  as  to  ask,  as  a  condition  of  com- 
pleting the  Lawrence-Roxburgh  railway,  that  the 
people  of  the  district  guarantee  at  least  3  per  cent, 
interest  ou  the  capital  cost.  But  although  the  re- 
sults of  railway  operation  are  improving,  and  will 
j)robably  continue  to  im])rove,  and  although  partisans 
of  state  operation  have  been  untiring  in  their  at- 
tempts to  draw  C(^nclusions  favorable  to  their  argu- 
ment, an  unbiassed  history  of  the  railways  in  New 
Zealand  only  condemns  it. 

103 


I 


WIIERK    AND    WHY    I'L-RLIC    OWXERSHIP    HAS    FAILED 

Government  property  in  New  Zealand  is  exempt 
from  taxation.  At  each  extension  of  its  activity  the 
amount  of  property  subject  to  taxation  diminishes, 
and,  if  these  enterprises  fail,  the  burden  of  the  tax- 
payers is  increased.  The  principles  of  sound  private 
and  public  finance  are  the  same  everywhere,  and 
profit  from  public  enterprises  is  indispens'ablr  in  o-der 
to  estal)lish  the  fact  that  they  are  an  advantage  as 
public   investments. 

It  is  not  so  many  years  since  the  state  of  New 
Zealand  undertook  the  (.  -tiou  of  two  coal  mines, 
known  respectively  as  the  ,  ''onville  and  Port  Eliza- 
beth mines.  In  1905,  1906,  and  1908  the  first  was 
losing  money.  In  191 1  it  lost  £3.219.  In  1910  it 
made  a  profit  of  £194.  and  in  19 12.  of  £863.  The 
mine  of  Port  b:iizabeth  brought  in  profits  as  high  as 
£21.313  in  1906.  But  its  profits  have  greatly  dimin- 
ished during  the  last  few  years,  and  in  1912  were 
only  £3.964. 

The  explanation  of  the.se  profits  is  simple.  Up  to 
1908  the  government  had  bought  166,000  tons  out  of 
a  total  production  of  237.300  tons  for  the  railroads. 
But  it  apparently  found  its  own  coal  too  expensive. 
It  began  to  buy  coal  from  private  dealers.  In  19 12 
it  bought  only  58,000  tons,  out  of  a  total  production 
of  244.500.  Its  mining  pnifits,  therefore,  have  been 
mainly  derived  from  its  own  railroad. 


I 


104 


CHAPTER  VIII 

GOVERNMENT    RAILROADS   IN    FRANCE 

1.  A   Good  Turn   to  the    Socialists. — The   Impromptu    Pur- 

chase of  the  Western  Railway. — Kxtravagance. — In 
Aid  of  the  Old  State  System. — Charges  Against  the 
Western  Railroad  Company. — Advantage  to  the  Stock- 
holders.—  The  Operation  Blanche. —  The  Purchase 
Price. 

2.  Net  Profits  of  Operation  by  the  State  and  by  the  Com- 

pany.— Provisions  and  Rectifications  Serve  Only  to 
Aggravate  the  Situation. — Supplemental  Credits. — 
Share  of  Labor. 

3.  Attacks  Upon  State  Credit. — 4  Per  Cent.  Bonds. 

4.  Conclusions. 

I.  In  Book  I,  Chapter  2,  I  referred  to  the  poHtical 
motives  tinderlying  the  purchase  of  the  Western  Rail- 
w:  of  France.  In  order  to  do  a  good  turn  to  the  So- 
cialists, Georges  Clemenceau  socialized  this  system. 

The  Minister  of  Public  Works.  Pouis  Barthou,  saw- 
in  the  purchase  a  double  advantage.  It  would  be  a 
sop  to  the  Radicals  and  Ratiical  Socialists,  for  one 
tiling,  and.  in  addition,  it  might  serve  to  cover  the 
deficits  of  the  so-called  old  government  system,  that  is 
to  say  the  lines  alreaily  under  jiublic  management. 
The  deficits  were  not  to  be  hidden,  however.  There- 
fore, Minister  Barthou,  who  had  at  fir^t  rcnudiated  the 
charge  that  such  deficits  existed,  openly  demanded  that 

105 


f 


WHKRE    AND    WHY    I'LliLIC    OWMiKSlIIl"    HAS    FAILED 

tlic   sum   of   jr),()()o.o()o    francs    |)e   >ol   aside    for   the 

hencfit   of   the   old   system    fnjui   the   special   treasury 

account  estahlished  ]:y  the  law  of  De  ..inber  i,S.  1908. 

In   XoveinDer.    1906.  the  ^nn-eriiment  introduced  a 

hill  for  the  purchase  of  the  Western  Railway.  altlKuigh 

It  confessed  "that  no  papers  relating  to  such  a  project 

were  on   file  in  the  (tftice  of  the   Minister  of    Public 

Works."  a  i)rovision  recjuired  by  law.     Xevertheless, 

the  government  demanded  that  a  law  authorizing  the 

transaction  be  i)asNed  by  the  Senate  and  the  (/hamlier 

of  Deputies,  before  the  end  of  the  year,  in  order  to 

prevent  the  Western  company,  which  had  had  a  profit- 

al)le  year,  from  increasing  its  net  profit. 

The  Senate,  however,  refused  to  be  intimidated  by 
threats.  Its  committee,  through  the  secretary.  M. 
Pre\4et,  who  assigned  the  strongest  possible  reasons 
for  such  action,  rejected  the  purchase  bill,  although  it 
had  already  passed  the  Chamber  of  ]:)eputies,  by  364 
votes  against  187.  76  out  of  the  80  deputies  from  the 
districts  touched  by  the  Western  roa  '  having  voted 
against  the  purchase.  Out  of  46  senators.  44  were 
emphatically  against  the  bill.  Nearly  all  the  chambers 
of  commerce  in  bVance  were  also  opposed. 

The  argument  advanced  in  favor  of  the  purchase 
was  that  the  Western  company  would  never  be  able  to 
repay  the  advances  that  had  been  made  it  under  the 
name  of  guaranty  of  interest,  that  thus  it  was  running 
on  government  money,  and  hence  it  was  neither  more 
nor  less  than  a  state  department  engaged  in  an  un- 
profitable operation. 

Yet  the  results  of  its  operation  indicated  that  the 
company  was  making  the  greatest  possible  effort  to 

106 


GOVI-RN'MKXT    RAILROADS    IN     FRANCE 

extricate  itself  fmni  the  crisis  nt  1901.  The  receipts, 
net  profits  and  interest  .L;uaranlies  for  1901,  1904  and 
H)0()  were  as  folltjws  (in  t  rancs )  : 

(luaranty  of 
Receipts  N'l  t  Profit  InUrest 

loni  i8j, 010.000    65.236.000    25.740,000 

1004  io2.03(),fX)o   84,775.000    i>.oi  1,000 

1906  207,958,000   8<:).f)25,ooo    5,964,000 

But  the  charge  was  made  that  the  company  had  ob- 
tained its  reduction  in  expenses  only  at  the  cost  of 
its  employees.  I  give  below  the  number  of  employees 
and  the  increase   in  their   salaries: 


Dec. 
Dec. 


31,    1000. 
31,    1905. 


Number  of 
EmpU)veus 

Total  WaKCS 

Average 
WaKC 

10,849 
21,272 

24.435.000  rr. 
27,2o8,oa3  fr. 

1.230  fr. 
1,279  fr. 

Thus  we  see  that  the  number  of  employees  had 
mcreased,  as  well  as  the  individual  salaries,  in  spite 
of  the  ditilculties  facing  the  company.  Moreover, 
during  this  same  period,  the  sick  and  other  bcne- 
lits,  bounties  and  allowances  of  various  kinds  had 
grown  from  2,188,000  francs  to  3,580,000  francs,  or 
an  increase  (jf  1,392,000  francs. 

The  other  argument.  hari)ed  on  ad  nauseam  by  par- 
tisans of  the  purchase,  was  that  on  December  31, 
ic)05,  the  Western  railway's  debt  to  the  state 
amounted  to  302.569,000  francs,  and  the  interest  on 
it  to  117,300,000  francs,  a  total  of  419,869,000  francs. 

But  the  Western  company  had  e(|uipment  estimated 
at  350,000.000  francs.  By  forcing  it  to  submit  to 
a  deduction  of  30  per  cent,  the  price  the  government 

107 


WHERE   AND   WHV    PUBLIC   OWNERSHIP    HAS    FAILED 

woiilfl  then  have  to  pay  for  the  road  would  be  245  - 
000.000  francs.  The  difference  between  419,869,000 
ami  -'45.000.000— or  174.000,000  francs— was  the 
clmrhin-  ar-unient  (jn  the  part  of  the  advocates  of  the 
purchase  to  hasten  action  in  order  to  safeguard  the 
interest  ol  the  state. 

And  how  (lid  this  purchase  safeguard  the  interests 
of  the  state  :^     The  gcjvernment  took  jvcr  the  road  at 
once;  but  it  increased  its  investment  in  the  Western 
company.     The  guaranty  of  interest  to  the  stockhold- 
ers would  come  to  an  end  in  1935  it  the  company  con- 
tinued to  operate  the  road,  while,  in  case  of  purchase 
by  the  state,  it  would  continue  to  the  end  of  the  fran- 
chise, in  1956.     As  a  result  the  chief  beneficiaries  by 
tlie   purchase   of  the   Western   road   were   the   stock- 
holders.    On  the  day  when  the  road  changed  hands 
Its  stock  was  .pi.,ted  at  830  francs.     It  subsequently 
tell  t(;  810  francs,  but  the  Cote  dc  la  Bourse  ct  de  la 
Banquc,  the  Monitcur  dcs  Inlcrcts  Matcricls    and  I 
myself    immediately    pointed    out    that    the  'advan- 
tages   resulting    from    the   purchase   would    raise   the 
value  of  the  stock  to  more  than  1,100  francs.    At  the 
present  time.  June  17.  1913,  it  is  quoted  at  870  francs. 
W  hat  did  the  purchase  cost  the  state?     The  official 
m  charge  of  the  financial  end  of  the  pv  :hase  (Direc- 
teur  General  du  Mouvement  des  Fonds)  declared  that 
'It  was   not   possible   to  determine   it   even  approxi- 
mately. •     Yet  the  Minister  of  Public  Works  declared 
that  the  whole  transaction  could  be  called  an  'Wra- 
tion  blanche."     That  is  to  say,  it  would  cost  the  state 
nothing. 

We  have  already  referred  to  the  fact  that  the  Senate 

108 


GOVERN- Mi:  NT    RAILROADS    IN    FRANCE 


rejected  the  hill  authoi  i/.in<:^  the  purcliase  ni  the  West- 
ern line.  But  the  Clemcnceau  ministry  hrought  so 
much  pressure  to  bear  upun  the  senators  that  the  pur- 
chase was  linally  voted  1)\-  a  majority  ot  three.  Thus 
the  state  found  itself  chart^ed  with  the  duty  of  furnish- 
inj.^  service  on  a  system  of  (),0(io  kilometers  (  5.6J5 
miles).  In  the  drafts  and  reports  of  the  couimittee  in 
charge  of  ihe  purcliase.  various  settlements  of  the 
points  at  isMie  hrtweeii  the  government  and  the  com- 
pany were  di sensed,  hut  these  were  all  summarily 
eliminated  1)\'  the  law  of  July  13,  kjoS.  which  ratified 
an  agreement  with  the  Western  company.  The  guar- 
anty of  intcre^-t,  which  was  to  expire  in  i')35,  was  ex- 
tended to  195  I. 

The  remainder  of  the  sums  due  from  the  company 
upon  bonds,  certificates  and  guaranties  of  interest  was 
fixed  by  law  at  the  sum  of  j.ijj.ooo  francs  ($1,353-- 
180).  There  was  no  discu'^sioii  of  the  419,869,000 
francs,  nor  even  the  174,000,000  francs.  The  real 
amount  of  the  sums  due  the  company  is  determined 
by  annual  estimates.  The  sum  total  amounts  to  4,972,- 
334,000  francs  ($944,743,000). 

2.  What  are  the  expenses  resulting  from  the  oper- 
ation of  the  system  liy  the  state? 

The  state  took  over  the  Western  Railway  January 
I,  1909.  During  the  five  years  of  its  operation  by 
the  company,  from  1904  through  190S,  the  average 
annual  net  profit  was  78.540,000  francs,  in  1909,  the 
first  year  of  state  operation,  this  net  profit  fell  to 
69,970,600  francs;  in  1910  tu  57,169,200  francs;  in 
19 II,   to   30,180,900    francs;    in    19 12,   to   21,932,900 


WllKKi:    AM.    UllV    I'llH.IC    OWXEKSlll|.    HAS    FAILED 

francs.      I'nMn    tins    last    figure    a    forecast    mav   be 

made  of  what  tlir  profit  of  iq,^  will  Ik-.     'i"hercfore. 

and    takin.t,^    into    consideration    the    probabilities    of 

1913.  we  have  an  annnal  avera^'e  of  41.071,000  francs 

Jor   the   net    profit    from    state    operation,    instead   of 

the  7X.5.4,MK,o  francs  fnmi  operation  by  the  company 

III    a    statement    ontlinin.i,r    the    special    features   of 

the  l.u(I.e:et  of  ioi_..  M.  Kl-,tz  estimated  that  the  deficit 

on  the  ..peration  of  the  n'estern   Railroad  would  not 

exceed  24,000000  francs  ($4,560,000). 

On  the  other  han.l  AI.  Clul.ron's  report  upon  the 
ai.phcation  for  supplemental  credits  ni  favor  of  state 
railways,  submitted  March  jq,  1912,  declares: 

"The  demand  for  supplemental  credits,  which  we  are 
about  to  examine,  constitutes  a  confirmation  of  the  esti- 
mates of  the  budget  of   191J.     It  was,  as  we  see  now 
anticipated.     The  figures  are  none  the  less  very  disturb- 
ing." ■" 


It 


It  was  not  anticipated  in  the  explanatory  state- 
ment of  the  budget  of  1912.  Some  lines  further 
on  M.  Cheron  adds: 


Progress  has  already  been  made  in  bringing  order 
into  this  department.  It  only  remains  now  to  control 
the  conduct  of  the  en^  rise  with  such  vigilance  and 
severity  as  will  reduce  the  truly  exorbitant  deficit  in  the 
profits  of  operation. 

•The  Honorable  Secretary  states  that  the  supplemental 
credits  granted  in  1912  have  decreased  the  net  profits  of 
the  old  .system  by  3.813,4^00  francs  and  increased  the 
deficit  of  the  Western  line  to  23,389,900  francs 

"Following  the  reduction  effected  by  the  commission 

no 


(;f)\T"R\M  I:n'T    KAII.NO  AI)^    IV     1K\N'(K 

ill  llic  onlinaiy  expenses  of  tlu'  \\  i-^ti.Tii  liiu-.  the  in 
crease  in  tlic  (Ictiiifiu-y  of  tlie  protits  of  tlie  '^y^teni  af 
fectiufj  the  hudj^et  of  tlie  ministry  of  I'nhlic  Works  is 
discovered  to  l)e  jj. ^8(),()(K)  francs  instead  of  24,5Ji>/)00 
francs.  Tli.'  total  deficit  in  tlie  jtrofits  from  tlie  oj)eralion 
of  the  system  will  thus  lie  found  to  Ite  for  i<)\J.  ami, 
includinj;  the  orif,diial  provisions,  Ki,5^3,(^(X)  francs,  in- 
stead of  Xj^.f  175.1  )<x)  francs  allowed  hy  the  j,'overnmeiU. 
If  the  deficit  f)n  i)artial  ojjeration  he  added,  or  J^'j.ocy^ 
francs,  we  have  a  total  deficiency  for  njij  of  82,874,901) 
francs." 


M.  Cheron  is  basins^r  his  cotnparison  (jn  the  year 
1908,  the  last  year  of  the  cnnipaiiy,  with  the  present 
condition  of  the  state  railway.  But  the  purcha>e  Iiad 
been  voted  b\'  the  C'hanibcr  (jf  Deputies  in  December. 
1906.  The  company  had  no  more  authority  over  it- 
employees,  and  its  condition  was  altogether  abnormal. 
Moreover,  during  the  fiscal  year  1908  expenses  had 
to  be  met  which,  if  the  purchase  had  not  Ijcen  made, 
would  normally  have  been  carried  over  into  the  year 
1909. 

The  unfortunate  situation  of  the  Western  company 
serves  rather  to  bring  out  more  clearly  the  serious- 
ness of  the  increase  in  the  expenses  of  the  system 
after  its  purchase  by  the  state. 

It  should  be  noted  further  that  the  actual  deficit  of 
the  company  in  1908  was  only  28.322,675  francs  68. 
to  which  M.  Cheron  adds  3,300,000  francs.  rei)resent- 
ing  additional  charges  resulting  from  the  agreement 
regulating  the  sums  due  annually  on  the  purchase. 

As  far  as  the  old  government  railway  system  is 
concerned,  we  can  speak  only  of  the  receipts  and  ex- 


NVIltRE   ANU    WIIV    I'L-ltirc    OU  NT  r':  1 T  IP    ITAS    lArF.Fl) 


§1 


SO 


TO 

4 


'■I 

X 


1< 

c 
•-■  P 

8  o 

o 
o. 


■-;  -    •  c 


8g 


Q, 
in     o 

u 


88 

T  - 

10  p- 

O  ih 

^5 

8±' 

(s  o 


ro 


o  J2 
it  «  o 


r:    -^  -c 


c- o 

ui    C    ,,■    c   ■>- 
C     C     u  •- 
o    'J    lA.      ,  C 

x  ~  i/   ■/■.  j: 


c  = 
a 


V   O 
o  H 


CJ^ 


o  « 
c 


Z,    c:  —  —    I- 


r  £-      'c 


S< 


—  c 


112 


n()\- 1-: U  S  M  I •  N  T    k  \  1 1  I< O  \  DS    I  \'    |- U  A  x c E 

[)cn(iitiiri'.N  (it  ciJfratMn.  Miicf  llif  co^t^  of  coiistriu-- 
tioii  have  not  vft  hccii  di  tcrmiiiKl,  Sinci.'  looS  the 
net  profit  ot  operatn  iii  ha-  roiiMcltTahly  (hmitii.sheil. 

"»"'<  iota  Imrtasc 

Cross     receipts,  . .  .58,./-^  ;i  r  fr  60    f)7j:oxyon  fr.       f  180,588  fr  40 

I'"x|>t'tlSl",    of 

operation     47.5«3.:76  fr.  05     (,.^,()o<,.(,(X)  fr      i5.4-;f'.7-M  fr  <o 


N'ct   profits  n.386.2.15  fr.  55       4.140.100  fr.  -7,246,135  fr.  55 

The  receipts  thus  rose  .S.ooo.ooo  francs,  whuc  the 
expenses  increa.se(l  15,000.000  francs.  Thiu,  the  same 
condition  is  reached  as  in  the  case  of  the  Western  hne. 

M.  Cheron,  after  Iiavini,^  reported  an  annual  in- 
crease in  the  receipts  of  3.50  per  cent,  "as  merely  sat- 
isfactory," remarks:  "The  progressive  increase  of 
expenses  is  the  true  cause  of  the  decrease  in  the  net 
profit  of  operation." 

The  following  table  presents  the  expenses  of  opera- 
tion: 

wo*  »0I»  Increase 

Labor   expvn.scs    .  .  j4.337.000  f r.         35.655,600  fr.     11.^8,600  fr 
Other  expenses    .  .23,246,176  fr.05     27..354.300  f r.      4,108,123  fr  QS 

Total    47.583.176  ir  05    63,ooQ,goo  f  r.     15.4-^6.723  fr  95 

These  figures  drew  the  following  criticism  from  the 
secretary : 

"It  would  be  rep^rettable  if  the  results  of  the  public 
operation  of  the  Western  line  did  not  convince  the  de- 
partment of  the  necessity  of  keeping  down  the  general 
expenses  of  the  old  system.  We  are  anxious  in  this  case 
also  to  reach,  or  rather  to  r  urn,  to  a  more  favorable  net 
profit.  Outside  of  justifi.  '-  improvements  in  the  posi- 
ng 


uiiKKi     \\i)  wifv  iM'iurr  (uvn'Fksiih'   [f.\ 


S    KAII.Kl) 


tion  of  the  cniploycrs,  tlurc  arc  expenses  wliieii  eoulcl  be 
iKiueeil   <)]■   rlieckeil. 


3.  ".Moreover,  we  would  say  tliat,  in  tlie  case  of  the 
old  sy.tein.  as  in  that  of  the  Uestern  line,  the  extraor- 
(h'nary  works  which  for  some  years  have  been  in  course 
of  construction  h'nvolvini,^  an  outlay  of  more  than 
21.000,000  francs  since  i(>oo.  tojjether  with  the  31,000,000 
francs  demanded,  and  with  the  same  excuse,  in  1912), 
oujjht  to  result  in  a  development  of  traffic,  and,  as  a  direct 
consequence,  a  corresponding  increase  in  the  net  profit." 

From  the  fore,j::..in.<r  extracts  it  would  appear  that 
the  greater  j)art  of  the  increase  in  expenses  came 
from  the  raising  of  the  wages  and  salaries  of  an  en- 
larged W(jrking  force.  The  proj)ortion  varies  for  'h( 
two  state  railway  systems  from  72  to  y;^  per  cent,  of 
the  total  increase  in  expenditures.  ()!i  the  newly 
acfpiired  Western  line,  the  improvements  in  the  situa- 
ti'in  of  the  employees  and  the  regulations  governing 
promotion  represent  together  more  than  two-thirds 
of  the  total    increase   in  labor  expenses. 

While  operatnig  expenses  fmm  igoS  to  19 12  have 
increased  72.304.000  francs  the  gross  receipts  have 
risen  from  2 1 7,645,000  francs  to  244.335,000  francs  ■ 
a  gain  of  only  26.690,000  francs.  The  difference  is 
at  least  45,614,000  francs. 

Moreover  this  deficit  must  continue  to  increase,  be- 
cause this  year  the  state  railways  have  just  issued  300,- 
000.000  francs  (S57.00o.00o)  of  4  per  cent,  bonds,  on 
which  the  state  must  pay  interest  in  the  fiUure. 

iMjreseeing  thi^  hoi.d  issue  M.  Rouvier  observed, 
in  a  speech  (jii  the  26th  of  January,  1904 : 

114 


GOVERNMENT    RAILROADS    IN    FRANCE 

"You  will  have  to  create  a  special  issue  that  you  will 
probably  term  'railroad'  or  'public  works'  bonds-  and 
m  sp.te  of  your  delusion  that,  because  you  are  going  to 
cM  ,t  by  another  name,  this  new  issue  will  be  sold  on 
lie  market  under  the  same  conditions  as  are  private 
I'onds.  you  will  have  made  a  serious  attack  upon  the 
credit  of  the  state." 

The  prophecy  has  been  realized.  The  Minister  of 
1-mance  did  issue  the  4  per  ceni.  bonds.  The  3  per 
cent,  rentes  fell  immediately  to  qj.Os.  In  October 
Ihey  were  .piotcd  under  91  francs.  To-dav  (  fune  18 
1913)  they  are  83.  The  ani<nint  of  depreciation  thus' 
forced  upon  the  3  per  cent,  rentes  has  been  greater 
than  the  300.000.000  francs  borrowed  by  the  state  for 
the  railroad. 

Optimists  prophesied  that  these  state  railway  bonds 
would  pull  up  ihe  rentes;  thev  have  been  pulled  but 
they  have  been  pulled  down. 

The  (piestion  has  been  asked:  How  can  a  bond 
issue  of  300.000.000  francs  have  any  influence  upon 
a  market  of  J  J. 000,000.000  francs  'f  But  there  are  not 
22.000,000.000  francs  in  circulation.  .\  portion  of 
tliKs  sum  is  tied  up  in  savings  banks,  insurance  com- 
panies, benevolent  associations,  the  property  of  minors, 
etc.  There  is  only  a  limited  amount  left  lo  bear  the 
entire  weight  of  this  issue  of  state  railwav  bonds.  The 
4  per  cent,  bonds,  issued  at  503  fr.u.s.  have  remained 
at  about  fhis  figure. 

Some  i-nprovements  have  been  nr.de  in  the  West- 
ern line;  but  m  five  years,  from  1909  t.j  i.;i3.  the  cost 
ol  construction  has  been  71 8.000.000  francs  ($136.- 
000.000).      According  to   the   partisans   of   the   pur- 

115 


WHERE    AND    WHY    I'lTBLIC    OWNERSHIP    HAS    FA      ED 


chase,   "ihis   is   the    fault   of   the    Western   company, 
which  <lelivt-re(l  a  system  in  poor  shape." 

But  at  the  end  of  191  1  M.  Colson.  formerly  Director 
of  Railroa'' ;  in  the  ministry  of  F'ublic  Works,  and  now 
councillor  of  state,  declared : 

"According  to  such  information  as  we  are  able  to 
gather  from  engineers,  whether  those  of  the  late  Western 
company  or  in  our  own  service,  it  is  clearly  apparent 
that,  down  to  tiie  final  day  on  which  it  remained  in  the 
hanils  of  the  company,  the  whole  system  was  in  ex- 
cellent shape." 

While  his  final  statement  could  not  well  be  more  ex- 
plicit : 

"The  state  of  the  roads  at  the  time  of  purchase  would 
neither  endanger  the  safety  of  travelers  nor  impose  ab- 
normal financial  charges  upon  the  new  management." 

Whereas,  the  net  profit  per  train  kilometer  varied 
in  the  case  of  tlie  ])rivate  companies  from  i  franc  75 
to  2  francs  71.  it  was  <jnly  o  franc  53  upon  the  West- 
ern (state)  line,  and  o  franc  44  on  the  old  system.  In 
other  words.  tJic  state  zvas  operating  its  new  purchase 
at  a  figure  four  times  IiigJier  than  the  operating  cost 
of  private  lines,  and  its  old  system  at  a  figure  five 
times  higher. 

Fioni  1909  to  19 1 2,  that  is  to  say,  in  three  years, 
the  decrease  in  net  i)rofit  upon  the  Western  line  has 
been  66  per  cent.,  and  the  operating  ratio  has  in- 
creased to  9 J  jier  cent.  This  is  bad  enough,  but  the 
situation  is  even  worse  on  the  old  system.    During  the 

116 


GOVERNMENT    RAILROADS    IN    FRANCE 

same  period  tiie  decrease  in  the  net  profit  was  Jt^  per 
cent.,  while  the  operating  ratio  reached  the  enormous 
figure  of  95  per  cent. 

Conclusions 

1.  The  inirchase  of  the  Western  Railway  was  a 
political  measure,  designed  to  conciliate  the  Socialists. 

2.  Presented  in  the  liglu  of  an  operation  that  would 
cost  the  state  nothing,  an  "operation  blanche."  it  has 
wrought  serious  harm  to  the  state.  The  sole  hene- 
hciaries  have  been  the  stockholders  of  the  Western 
conipniiw 

3-  i'he  employees  of  the  state  railway  instituted 
a  strike,  and  their  exaction^  have  resulted  in  increased 
expenses,  which  have  not  been  offset  by  improvements 
in  tlie  service. 

4.  The  issue  of  state  railway  bonds  at  4  per  cent, 
has  caused  a  fall  in  3  per  cent,  rentes. 

5.  The  operating  costs  are  even  higher  on  the  old 
state  system  than  on  the  newly  acquired  Western  line. 


117 


CHAPTER  IX 


PUBLIC    VS.    PRIVATK    OPERATION 

Public  7's.  Private  Initiative. — Extent  uf  Railroad  Lines 
Operated  by  tbe  States  and  by  the  C'omi)aiiies. — Oper- 
ating Ratios. — Government  Profits. — Reduction  of 
Rates  in  ti^eat  Britain. — Diliticulties  in  l-'ixing  Re- 
sponsibility   in    State    Railway    Operations. 

The  advocates  uf  Stale  S(K'ialisni  say  with  admir- 
able assurance:  "Wherever  private  iiiiiiative  has 
proved  inadetjuate  the  slate  tniisl  step  in." 

Has  the  spirit  of  initiative  lieen  lackinf^  in  private 
nianagetnent  of  railways?  Private  companies  have 
been  forced  to  struggle  for  a  long  time  against  gov- 
ernment opposition,  but  t(j-day.  although  Prtissia  is  a 
flat  country,  where  iKjt  a  single  tiuinel  is  to  be  found, 
and  where  the  lines  are  nnich  easier  to  construct  than 
in  Great  Britain,  the  British  have  a  system  of  more 
than  n;  miles  per  loo  stpiare  miles,  while  the  Prussian 
system  has  only  i6  miles,  or  ii  per  cent.  less. 

Did  the  United  States  government  build  the  daring 
lines  which  have  joined  the  two  oceans? 

Edwin  Pratt,  in  his  Railways  and  Nationalisation, 
has  demonstrated  that  private  comi)anies  ])ossessed 
more  than  69  per  cent,  of  the  entire  length  of  line  of 
t'ie  existing  railways  in  ic)o8.'     .Xnd.  folhiwing  a  se- 

*  Raihi'ays  and   Nationalizaiio)!,   by    Edwin    A.    Pratt,    1908. 

118 


riM'Lic  vs.   I'KivAri-:  operation 

ries  of  deliatcs  with  (icrnian  publicatinns.  he  brought 
his  fif^ures  u|)  to  dale  in  ihc  London  Times,  of  October 
I,  1912.     Here  they  arc  : 

Railways  Percentages 

Conlinfnis  State  Companies  Total  Stale        Companies 

I'-iiropi-'    I07,(KX)  (/;,Ux)  J07,j(x:i  51.^  48.1 

America    12.200  .^i4.7"o  326.900  3.7  96. ^ 

••^'^'•T     .Vi.7o<.)  j6,(.0()  63,300  58  42 

Africa    11.200  11.200  22.400  50  50 

Australia     18.000  i.jcxi  ig.joo  037  6,3 

186.700        453.300        6.3Q,ooo        2Q.I         70.9 

Thus,  over  two-thn-ds  of  the  railways  of  the  world 
belong  to  jirivate  conipaiiies.  Moreover,  of  ihe  24.500 
miles  of  railway  helongiTig  to  the  state  of  British 
India.  18.000  miles  are  operated  by  i)rivate  companies. 
In  Holland  all  the  lines  are  operated  by  companies. 
In  ik'lgium  the  tramway  lines  are  longer  than  the 
state  railways,  and  they  are  operated  by  private  com- 
panies. Lines  in  (ireat  Britain,  which  have  three, 
four,  or  even  more  tracks,  are  included  in  these  fig- 
ures on  the  line  and  not  the  track  basis.  The  total 
length  of  line  is  23,287  miles.  The  length  of  main 
track,  however,  is  39,851  miles,  and  of  main  track  and 
sidings,  54.31 1  miles. 

The  greatest  .system  in  the  world,  that  of  the  United 
States,  is  owned  by  private  companies.  Mr.  Bryan, 
on  returning  from  Europe  in  1903,  introduced  na- 
tionalization of  railways  into  his  platform,  without 
informing  any  of  the  members  of  the  Democratic 
party  of  his  intention.  This  brilliant  inspiration 
helped  to  destroy  his  chances   for  the  presidency. 

The  operating  ratios  suffice  to  show  that  superior 

119 


WHKRK    AN.)    WHY     IMMIJc    OWNKKMUr     HAS    lAM.ED 

adminHtrativc  capacity  is  not  to  l,c  found  on  the  side 
of  the  sex  era!  states  which  exercise  it  in  this  direc- 
tion. 

Opcrativj.'^   Ratios 
State    Rnilwnys: 

IM'X    f'riissia    

ii)O.S    Austria "'  T" 

Havana    .  .      "^  "^ 

■'W  System  Inuij^ht  liy 'F^anc;-' from '^h.  '  Western '^^    '"   ''^ '^ 
company 

IQIO    lIuiiKarv    ^72% 

80.0% 

J'ri'nch    Private   Compaiiic-^    (1009); 

Cdiiipapnie    du    X.ird...  q„ 

C(.mpa,t^iiif  (lTI.:.st   ^^  ^ 

Cnmpa.miiu  ,i'(  )r!6aiis ^^  ^ 

Compagnic    Paris-Lyon-AicHit'crranec! ' H^ 

Compagiik'   (In   Midi..  ^^  „ 

54/0 

We  have  seen  that  the  state  railways  of  f'ru-.sia 
have  yielded  revenue  to  the  state  budget  But  in 
Kelgiuni.  Italy,  Austria,  and  Hungarv  thev  have  only 
been  a  bcirden.  The  partisans  of  socialized  railways 
m  !•  ranee  have  neglected  to  tell  us  what  the  French 
government  railways  have  contributed  to  the  state 

In  the  various  countries  state  raihvavs  are  exemot 
from  general  taxation.  The  amount,  however  that 
would  be  collected  from  them  were  they  private  enter- 
prises should,  in  all  ju.stice,  be  added  to  their  expense 
account.  In  France  passengers  and  shippers  upon  the 
state  railway  lines  are  taxed  for  speed.  They  pay  a 
stamp  tax  on  baggage  and  other  receipts,  and  wav 
bills,  taxes  u[>on  vouchers,  and  custom  duties  on  pit 
coal.  The  saving  resulting  from  economies  in  trans- 
portation, as  given  in  the  following  table,  are  reckoned 
and  with  reason,  among  governme  it  profits: 

120 


riBLIC    vs.     PRIVAIK    OPKKATION 

O'f^  ^vstcm    lo.sTi.ooofr. 

bystcm  hoiight  from  the  Western  company     4i,4J2,50o 

■'""'3'    51.934.400  fr. 

The  followiii.s;  sums  represent  tlie  contributions 
made  by  tbe  l-'rendi  (private)  railwav  companies  to 
the  state ; 

Nord         list  r.o        i--L-St       Midi    ■''"''"•i 

(Millions  of  Francs)  "y 

P  Lines 

Iransportation    taxe>     17.970    4.49.,     ,7,561     .^.,,9,     H.50^     i  s^; 
^ranci,.se  taxes  ....       7.782.     7,687      9.867     r8,S.'S    5,228       'oa. 
Other    taxes    arising 
from     tlic     railroad 

^'"'^"^"y    ■. '451     ,.2.,S      .^,079      .VV'       051        192 

liconomies  in  trans- 
portation rcsultmg 
from  contract   con- 

,''■*'""'    12,40.3  i,,,872    23,582    .U.864    8.008    2.050 

.Army    transportation  ,05        261  ,„  i  ,1555         94         ^g 

^     '^"'■''  ,•  •  ■ ,  •^^'•■' '   '7.551     55.000    87,088  23,684    4.819 

Or  a  total  of  2,v-.S5.3.o<x>  francs. 

This  burden  per  kilometer  is  a  very  heavy  one. 
Principal  Lines :  P^^^^^ 

i:: -,5.0 

p^  •;•••. 7.60.3 

Fans-Orleans    _j,, 

Paris-Lyon-Mcdittrranec    n  ,  il 

,^iid>  •••••. :::::::::::::::::  S 

secondary  Lmes   ,  ^^^ 

Such  contributions  to  the  state  are  not  to  be  de- 
spised, and.  in  any  comparison  between  the  profits  per 
kilometer  of  the  government  railways  and  those  of 
the  railways  operated  by  French  companies,  they 
should  be  taken  into  account. 

121 


WriFRK    AND    WHV    IMTUIC   0\V  NKRSIl  II-     ll.\s    lAILKD 

■|he  fr>ll()wni,i:  example,  liorn.wcd  Inaii  tli-'  histnry 
"f  the  I'.ritish  railways  sli.,\\s  tlu  necessity  of  grant- 
ing large  freedom  of  action  to  railways. 

The  railways  of  Creat   liritain  had 'a  certain  com- 
mercial policy,   'i'heir  general  freight  rates,  nuich  more 
profitable  than  special  rates,  represented  ;;  per  cent   of 
the  total  traffic.     They  had  .,nlv  one  regulation  which 
anphed    erpially    to    all    shippers,    an.l    this    regulation 
was    enforced.      llefore   the   rigid    law    intro.hiced    in 
\Sr,i-iHc,2  the  railways,  hy  way  of  experiment,   had 
made  a  rate  reduction,  worked  out  with  care,  hut  al- 
lowing for  changes  in  its  provisions,     [f  there  should 
he  no  increa.se  in  traffic  as  a  result,  the  rate  was  to 
he  raised.     To-day  such  action  is  no  longer  p(^,ssihlc 
except   by   the   authority   of   the    Railway   and    Canal 
Commission.      .\s   a   conscr|uencc.    where   during  the 
decade  1882- iS(,j  rates  had  hcen  reduced  14  ])er  cent., 
in  the  decade  that   followed  they  were  reduced  only 
2  per  cent. 

All  state  railway  systems  hold  themselves  more  or 
less  absolutely  free  fnjm  any  responsibility.  We 
have  already  described  the  point  of  view  of  the  Prus- 
sian administration  in  this  regard.  The  Italian  rail- 
n-ays  have  adopted  the  point  of  view  that  any  acci- 
dent involving  loss  to  their  pas.sengers  or  to  shippers 
IS  a  dispensation  of  Trovidence.  In  France  we  have 
seen  a  verdict  of  th.-  Court  of  Brest,  and  an  opinion 
of  the  Court  of  Rouen,  deciding  against  the  State 
Railway  department,  in  its  attempt  to  escape  liability 
for  damages  by  appealing  to  "circumstances  beyond 

122 


I'l'IU.IC    \.x      IKi\  A  IE    ol'IK  \riO.V 

flicir  contn-l"  in  cases  in  whidi  i„,  private  .ompany 
unuld  (Irtain  "i  MtTcrin-  sucli  an  excuse. 

After  havnii:  stmlied  in  detail  tlie  .tjrcat  Iluropcan 
systems,  an  American.  Air.  Cliarles  llee  Raper.  con- 
cludes :  ^ 

(  I  )  "That  .i,'(ivcmnicnt  ojicration  of  the  railways  lias, 
with  a  few  ii()tal)Ic  exccfUions,  as.  for  instance,  tiie 
IVussian.  not  paid  all  of  its  expenses,  and  that  it  has 
consequently  heen  a  hurden  upon  tlie  taxpayers. 

(2)  'That  government  operation,  tiinu.qh  it  has  heen 
a  hurden  to  the  citizens  as  ta.xpayers.  has  not  .^upplied 
tlieni  wuh  a  particularly  excellent  service— that  its 
tiMp:ht  service  especially  has  lacked  in  elficiencv  and 
practical  adju>tahility  to  traffic  and  industrial  c  -nd'itions. 

(.0  •Th.if  f^'overnnient  operation,  though  it  has  not 
heen  particul.irly  efficient,  lias  not  heen  especially  cheap— 
that  its  frei.ght  rates  have  not  heen.  after  all  allowance 
for  difference  in  trafific  conditions  has  heen  made,  as  low 
as  those  upon  a  nuniher  of  the  privately  managed  rail- 
ways." 

State  railways  may  find  themselves  in  one  of  three 
situations: 


First:  Where  they  are  profitable,  and  their  profits 
are  absorbed  by  the  public  treasury.  In  this  case  the 
interests  of  the  shipiiers  and  passengers  are  beinj,^  sac- 
rificed to  those  of  the  state.  This  is  the  case  in 
Prussia. 

Second  :  Where  they  lose  money  and  the  taxpayers 
make  up  the  deficiency.     Here  the  interests  of  the  tax- 


'  Railuay  Transf>oftatwn. 


127, 


VVIIIKl,     \N|)    wiiv    ni;l  K     (lUXI.KSIIir    HAS    lAII.KD 

payers  arc   licin.^  .sacnriccd   [>>  ilw.-c  ol'   .shippers  and 
passengers. 

Third  :  iiiially  there  is  a  thirfl  case,  in  which  the  in- 
terests nf  tlu'  taxpayers,  passengers,  and  shijipers  are 
sacnlKol  iM  tin-  dcniands  nf  emjjloyees.  In  such  cases 
the  railr-iad  i-  Ikip;;  'iprratcd  tor  the  I)enelit  of  the 
employees  and  n.  .t  tor  that  of  general  transportation. 
This  condition  appear-  more  or  less  in  all  state  sys- 
tems. 


124 


CH.\PTF.r>;   X 

THE    HOLY    CITH'S    OF    MUXICIPAL    ori-RAIK^X 

I.   Firitish    (  itics.— Arpuimiit    Against     Economic     I.ilR-ral- 
ism.— What  Is  Jts  Value? 

Tlie  delusions  of  the  advocates  of  state  and  nmin'ti- 
pal  o\vner>hii)  '^re  i^cnerally  set  forth  with  that  same 
naivete  that  we  have  already  seen  displayed  in  the  re- 
ports upon  the  WeMern  (state)  Railway.  Whenever 
they  are  at  a  loss  for  examples  of  satisfactory  results 
from  state  monopolies  they  point  to  the  municipal 
operations  of  Firitish  cities. 

TliCy  say  with  emphasis:  In  the  country  of  .\dain 
Smith,  and  of  Cobden,  in  spite  of  the  Manchester 
school,  the  cities  have  shown  themselves  the  boldest 
m  the  world,  in  enterin.c:  "pciU  the  path  of  municipal 
Socialism.  London,  Birminj^ham.  (]las^o\v.  and  even 
Manchester  are  holy  cities.  Could  a  more  decisive 
argument  exist  for  the  purpose  of  proving  the  inade- 
(|uacy  of  private  initiative,  or  that  every  industry 
which  is  a  monopoly  in  fact  ought  to  become  a  legal 
monopoly?  Have  they  not  achieved  a  success  which 
proves  that  municipal  authorities  can  administer  as 
well  as.  if  not  better  than,  private  enterprises? 

The  imp(jrtance  given  to  British  municipal  experi- 
ments forces  me  to  treat  it  in  special  chapters.' 

'See  Raymond   Boverat :     Le  Sncialismc  Municipal  <'>•  .ingle- 
terre  ct  ses  Rcsultats  Financiers   (1907).  2nd  e'^     .yii.     Major 

1^5 


WHERE   .\.\r)   \VI?V    priu.ic   (nV\(-KSMII'    has    iaii. 


in 


Darwin :    Mumatal   I  n,Jr      I.nr.i   Av.hiirv      On  Mumnfal  ^>»d 
n'u"!,     ''"'"'""'   D.sCill.tils:  l.r  So,  ,al,smc  ,i  tracers  li-s  Circles 
U    \Mh-{     .Soiialtsnic  rt  MiinuirLilismc.     Hugo  Mcvcr  •    ,Uu»riri- 
ral    ihvncrshif    in    Circat    Bntain.     Graham    and    Warrn.nnloi. 
laxiition.    Local   and    Imtcnal.    and    Local    C.icrnnunt,     iV^)i) 
hairlic:    Municipal  .Idimnistrntion.     Davies :     rost  of  Municipal 
Iradnig.     Municipal  and  I'riiatc  Operation   of  L'ublic   Utilities 
/Report    to    the    \ationa!   Ci:  ic    f-ed,    alion.       1  hrcc    vulum.'s    „, 
octavo.     Hw;    New  Vork      Municipal  Year  Book,  edited  by  Dun- 
can, published  aiintially   by   the  Municipal  Journal. 


126 


CHAPTER  XI 

OPERATION     OF    GAS    AND     ELECTRICITY    IN     THE 
UNITED    KINGDOM 

1.  Gas  Industry   Founded   by    Private    Individua's.— Munici- 

palities Have  Profited  by  the  Experience  of  Indivi- 
duals.— Two-Thirds  of  the  Gas  Furnished  by  Private 
Companies. — Cotnparati\  c  Table. 

2.  Electric     luiterprises. — Municipalities     Opposed  to     the 

Introduction  of  Electricity. — Minority  Lighted  at  Ex- 
pense of  Majority. — Financial  Results  of  Gas  and  Elec- 
trical Undertakings, — Variations. — Local  Authorities 
Which   Are  Operating  at   a   Loss. 

I.  In  Major  Leonard  Darwin's  remarkable  sttidy, 
entitled  Municipal  Trade.  I  find  the  folhjwiiig  figures, 
indicating  the  number  of  British  municipalities  which 
have  undertaken  to  supply  gas.  During  the  perioil 
1 820- 1 839  only  three  mimicipal  plants  appear.  Dur- 
ing the  period  1870- 1879  thirty-eight  municipalities 
adopted  the  system,  and  from  i8()o  to  1892 — fifteen. 
Not  until  the  gas  industry  had  been  firmly  established 
by  private  companies  did  municipalities  take  a  hand  in 
the  game,  having  then  at  their  disposal  the  labor,  build- 
ings, e(}uipment,  mains,  and  consumers  already  pro- 
vided for  them  by  their  competitors.  Nor  was  this 
change  of  proprietorship  always  attended  by  imme- 
diately disastrous  results.  In  such  cases,  however,  a 
disaster  would  have  been  a  miracle. 

127 


WHKRK    AN-n    WflV     IHBMC    OWNERSHIP    HAS    FAILEI> 

An  incident  rclatin-  U>  Manchester,  which  has  su;)- 
pl.ed  ,^Ms  smcc  iSj4,  l,eirays  the  saiuj-froul  with 
whicl:  municipal  authorities  are  capable  of  treating 
certain  financial  (piestions.  On  the  occasion  of  a 
royal  visit  to  that  city,  in  1905.  the  gas  reserve  fund 
was  called  upon  to  provide  £8.897  ($43,300)  to  defrav 
the  expense  ot  the  king's  entertainment. 

A  Birniinghan,  municipal  gas  plant  was  the  grand 
municipal  ideal  of  Joseph  Chamberlain.  In  1874  he 
bought  out  the  two  existing  companies  for  £2.000000 
(Jf9.740.ooo).  1  he  measure  was  regarded  at  the  time 
as  a  [.urdy  hscal  one.  In  1905  Birmingham  was 
charging  2s  6d  per  i.ooo  cubic  feet  of  gas,  when  a 
private  company  at  Sheffield  was  charging  is  5d 

\'ince  estimates  that  the  favors  granted  to  employ- 
ees represent  an  expense  to  British  taxpayers  equiva- 
lent to  an  increase  in  taxaticm  of  4  shillings  on  the 
pound,  or  20  per  cent.^ 

Sixty-three  per  cent.,  or  almost  two-thirds  of  the 
public  gas  lighting  service  of  the  United  Kingdo.n 
IS  furnished  by  private  companies;  the  proportion  is 
the  same  for  private  gas  consumption.  In  England 
and  in  Wales  the  proportion  of  gas  furnished  by  pri- 
vate companies  is  69  per  cent.  In  the  United  King- 
dom the  consumers  supplied  by  private  companies 
represent  59  per  cent. :  in  f^ngland  and  Wales  65  per 
cent.  ^  ^ 

The  capital  of  the  companies  has  increased  £2017- 
000  ($9,822,790),  while  that  of  local  authorities  has 

'  Vince,  History  of  the  Corporation  of  Birmingham.  ig02 

128 


OPERATION  OF  GAS  AND  ELECTRICITY  IN  GREAT  BRITAIN 


decreased  slightly.  The  .erross  receipts  of  the  com- 
panies are  a  little  higher  than  those  of  the  local  author- 
ities, but  the  net  returns  are  less.  Jt  is  easy  to  grasp 
the  reason  for  this.  In  the  furnishing  .jf  gas  local 
authorities  have  certain  privileges  not  accorded  private 
companies.  The  price  of  gas  furnished  by  private 
companies  is  2s  gd,  by  local  authorities  2s  6d.  Yet 
the  local  authorities  ackno\vle(?ge  a  net  revenue  of 
9:^4  per  cent.,  while  the  companies  show  only  5Vc 
per  cent. 

According  to  a  parliamentary  report  of  January, 
19 1 2,  the  capital  invested  in  gas  works  in  the  United 
Kingdom  amounts  to  £134.000,000  ($653,000,000). 
The  following  table  summarizes  the  accounts  and 
operations  of  these  gas  undertakings : 


Uj, 


Local  Authorities 

1010-1911 

Number    agg 

Capital  outstanding    i30,2oo,5i2 

Receipts    £10,829,758 

Expenditure    £7,902,451 

Ratio  to  income  ( % ) 7'-95 

Net  revenue   £2,927.307 

Equivalent    return   on   cap- 
ital    ( %  )      g^ 

Gas  sold  (feet  i.ooo's)....  67,491,765 

Length  of  mains  (miles)..  14,102^ 

Consumers    (number)    2,666,146 

Public   lamps    349.120 

Approximate       average  s.  d. 

cha'-ge  per  1,000  feet 26 

129 


-t-Inc. 

I009-I9IO 

or  -Dec. 

-•<.)3 

+5 

£30.478.862 

—£278.350 

£10.398.263 

+  £431.495 

£7,710.9-^5 

+£191,466 

74- 15 

—  1.19 

£2,687,278 

+£240.029 

8^ 

+  1 

65.352,790 

+2,138.975 

1 3.757  ^i 

+345 

2.590.279 

+75,876 

343.021 

+6.099 

s.  d. 

s.  d. 

25H 

—0  0^ 

ll-.<^ 


WHERE    AND   WHY    I'UBLir   OWNERSHIP    HAS    FAILED 


Comp..  lies 
1910-11 

Number   5" 

Capital  outstanding £02.103.101 

Receipts   ijo,446,438 

Expenditure    £15,308,928 

Ratio  to  income    (Vo) .  .  .  74.87 

Net    revenue    £5.'37.5io 

Equivalent  return  on  cap- 
ital  (%)    55/8 

Gas  sold   (feet   1,000's) . .  115,342,(63 

Length  of  mains   (miles)  22.020 

Consumers    (number)    .  .  3.751.703 

Public  lamps   J7'.665 

Approximate    average  s.  d. 

charge  per  1,000  feet..  29 

We  have  no  detailed  report  permitting  us  to  follow 
up  the  comparison  between  the  results  of  operation  by 
private  companies  and  by  local  autliorities.  But,  in 
any  event,  although  municipalities  have  been  furnish- 
ing gas  in  Manchester  since  1824,  and  in  Beverly  and 
Carlisle  since  1850,  their  example  has  not  been  fol- 
lowed generally,  since  private  companies  are  still  sup- 
plying gas  to  two-thirds  of  the  population. 


+Inc. 

1909-10 

or   -Dec. 

501 

+  10 

£00, 1 20.C)()2 

+  £2,072,229 

£i(),()5i.77t) 

—  £494.659 

£15,097,058 

+  £211.270 

7567 

— 00,80 

£4,H54.i^i 

+i283,38«j 

5^^ 

+;4 

11^.334.153 

+3,008,010 

-'1.473 

+547 

3.573.796 

+177,907 

369,882 

+1,783 

s.  a. 

s.  d. 

2   9'A 

-0  34 

I 


2.  The  first  electric  installations  were  established  at 
Eastbourne  and  Hastings  in  1882,  and  in  London  in 
1885.  Bradford  created  the  first  n.unicii)al  plant  in 
1889. 

An  act  of  1882  authorized  local  authorities  to  buy 
up  comj)anies  at  the  end  of  twenty-one  years,  and 
afterward,  at  the  end  of  successive  seven-year  periods. 

130 


OFERATION  OF  GAS  AM)  KLECTRICITY  I X  GREAT   BRITAIN 


In  determining  the  purchase  price  only  the  market 
vakie  of  land,  ecjuipment,  material,  etc.,  was  t<)  be 
taken  into  account.  No  other  compensation  was  to 
be  paid.  The  object  of  the  act  was  to  prevent  the 
construction  of  any  more  private  plants. 

The  local  governments  were  naturally  anxious  to 
[)rotect  their  gas  plants  against  any  possible  compe- 
tition. The  testimony  of  Mr.  S.  Chisholm.  provost  of 
Glasgow,  before  the  committee  of  i()oo.  ofifers  a  tvpi- 
cal  example  of  this  policy.  Municipalities  wanted 
autiiority  to  construct  electric  plants  only  in  order  to 
prevent  i)rivate  con-.oanies  from  doing  so. 

The  City  of  York  obtained  a  provisional  order  in 
1892,  but  it  did  not  supply  electricity  until  1900. 
Birkenhead  waited  from  1886  until  1900:  Bristol, 
from  1883  to  1893;  Greenwich,  from  1883  to  1889. 
l*"our  years  appeared  to  be  the  average  delay,  accord- 
ing to  the  table  submitted  by  Campbell  Swinton, 
which  includes  a  list  of  fifty-four  municipal  electric 
lighting  orders.  The  local  authorities  were  evidently 
more  anxious  to  prevent  action  by  others  than  to 
enter  into  the  business  themselves. 

In  order  to  protect  the  intere.sts  of  its  gas  plant  Bir- 
mingham required,  as  the  condition  of  its  approval  of 
the  Birmingham  electric  supply  company  in  1890,  that 
the  latter  should  supply  only  the  principal  streets  of 
the  city.  In  1898,  however,  the  company  being  pros- 
perous, the  city  decided  to  purchase.'  At  the  time 
the  negotiation  was  completed  the  market  price  of  each 
share  was  £10  los  od,  a  figure  which  would  naturally 

'  Raymond  Bovt-rat.  Le  Socialisme  Municipal  en  Angleterre  et 
Ses  Resultats,  p.   190. 


WHERE    AND    WHY    PUBLIC    OWNERSHIP    HAS    FAILED 


form  the  basis  of  the  purchase  price.  The  nuinici- 
pality  paid  £420,000  ($2,045,000).  Lost  taxes  and 
sinking  fund  payments  amounted  from  the  beginning 
to  £17,000  ($82,800)  :  that  is  to  say,  to  £4.000 
($19,000)  more  than  the  profits  reahzed  by  the  com- 
pany in  1897.  In  March,  1901.  after  fifteen  montlis 
of  operation,  the  deficit  was  £4.175  ($20,332);  in 
1902-1903  it  had  reached  £4.813  ($23,239).  The 
number  of  consumers  was  5,000,  out  of  a  pojiulation 
of  from  600,000  to  700.000:  and  this  small  number 
was  being  supplied  at  the  expense  of  the  wh.  body 
of  taxpayers. 

It  is  not  enough  for  an  industry  to  be  municipalized 
in  order  to  bring  in  custotners.  Bath  '  bought  out, 
for  £24,500  ($119,315)  an  enterprise  which  had  cost 
its  founders  £43,000  ($209,400)  :  but  municipalization 
did  not  furnish  it  with  consumers.  In  1900- 1902  the 
plants  upon  which  the  municipality  had  expended 
£7,800  ($38,000)  were  out  of  use,  and  the  engineer 
estimated  the  sum  necessary  to  put  them  back  into 
condition  at  £70,000  ($341,000).  The  town  found  no 
company  willing  to  take  up  the  business.  It  therefore 
continued  to  operate,  but  at  a  loss.  In  1909-1910  it 
had  lost  £1,335  ($6,500)  and  in  1910-1911  £157 
($764). 

A  local  government  board  return  has  been  de- 
voted to  accounts  of  municipal  enterprises  during  the 
four  years  from  1898  to  March  31,  1902.  We  give 
below  the  results  of  the  gas  and  electrical  enterprises 
to  March  31,  1902: 

'  The  Times  (London),  September  5,  1902. 

1^2 


» 


■| 


OPERATION  OF  GAS  AND  ELECTRICITY  IN  GREAT   BRITAIN 

Gai  Electricity 

Capital   estimate  by   municipalities £24.028.000  ii2so8ooo 

Capital    demanded    18.407,000  M.iq2;ooo 

Average   annual   receipts    S.833.000  1,136,000 

hxpenses    of    operation 4.465,000  662.000 

Mamtenance    and    repairs 79.000  19.000 

p-"""    P'"°fil     1,289.000  455,000 

Interest   and    .mkmg    fund 892.000  465000 

'^.^V,  397.000  

^^^   '«"    10,000 

Gas,  then,  yields  a  profit.  The  gross  profit  was 
£1,289,000,  or  5.4  per  cent,  on  the  capital  invested. 
Any  municipality  might  hope  to  obtain  this  gross 
profit. 

But  if  v.e  deduct  the  amount  necessary  to  pay  off 
the  capital  and  pay  interest,  we  would  require  a  net 
revenue  of  4.8  per  cent,  on  the  capital  invested.  This 
IS  all'jwing  3-4  per  cent,  for  interest  and  an  amortiza- 
tion period  of  32  years.  Then,  if  4.8  per  cent,  be 
deducted  from  the  5.4  per  cent,  of  gross  profits,  we 
find  that  the  profit  to  the  municipalities  is  about  0.6 
per  cent.  Thus,  the  municipalities  can  reckon  that 
they  make  a  profit  of  a  little  more  than  0.5  per  cent. 
Such  are  the  dazzling  "results  of  numberless  experi- 
ments" in  England. 

But  Major  Darwin  shows  that  an  interest  rate  of 
3l-4  per  cent,  is  very  low.  and  that  it  has  a  tendency 
to  increase.  It  is  true  that  the  period  of  amortiza- 
tion can  be  lengthened,  but  a  long  period  of  amortiza- 
tion would  be  only  an  added  burden. 
^  Further,  Major  Darwin  makes  a  relative  calcula- 
tion, based  upon  the  grosr-  profit  of  municipal  opera- 
tions of  gas  plants  for  several  periods. 

^33 


WHERE   AND    WHY    PUBLIC   OWNERSHIP    HAS    FAILED 

Annual 
Number  of  Average 

Enterpnaei      Profits  (%) 

Before   i860   '9  6.3 

1860-1869   9  5-9 

1870-1879  35  5-4 

i88o-i88q  "  5-3 

1890-1899  9  4-8 

In  these  calculations  the  gross  profit  for  the  last 
period  is  lower  than  that  during  the  years  1898-1902. 
Major  Darwin  therefore  concludes: 

"If  we  consider  that  local  governments  will  have  to 
pay  4.8  per  cent,  during  the  32  years  of  amortization  of 
capital,  it  can  then  be  said  that  the  profits  on  municipal 
operation  of  gas  plants  will  vary  from  zero  to  a  trifle 
more  than  ^/^  per  cent,  at  the  maximum.  In  any  event, 
the  later  municipalizations  of  gas  are  less  profitable  than 
those  which  preceded  them." 

On  March  31,  1904,  out  of  190  municipal  e' metric 
enterprises  116  claimed  a  profit,  while  74  reported 
losses  amounting  to  £80.504  ($392,054).  The  last 
report  of  Municipal  Trade  is  dated  June  2.  1909,  and 
it  includes  only  a  few  Scotch  cities.  It  gives  no 
details  regarding  capital,  and  only  the  annual  receipts 
and  expenses.  In  Edinburgh,  in  1902-1903,  the  excess 
of  gas  receipts  was  £3.303;  in  1903-1904  the  deficit 
was  £3,397;  in  1904-1905  the  excess  was  £5.965,  but 
it  fell  again  in  1905-1906  to  £1.460. 

For  electricity  the  excess  of  receipts  was  £14.532 
in  1002-1903;  in  1903  1904,  £23,997;  in  1904-1905, 
£ji,i43;    in  1905-1906.  £16.530. 

In  Glasgow  excesses  of  receipts  occur  regularly, 
but  they  are  subject  to  extreme  variations. 

134 


'i 


OPERATION  OF  GAS  AND  ELF.C  fki'Il  V  IN  GRiiAT  BRITAIN 


The  municipalities  which  opf:-ate  electrical  plants 
have  an  excellent  customer  in  their  tramways,  to  the 
operation  of  which  electricity  was  first  applied  in 
1885. 

According  to  the  Municipal  Year  Book  for  1912 
local  authorities  to  the  number  of  140,  having  ob- 
tained from  the  Board  of  Trade  the  "orders"  pro- 
vided for  by  acts  of  1882,  1888,  1889,  and  1909, 
turned  them  over  to  private  companies,  whereas  only 
20  municipalities  had  made  use  of  the  privilege  to  buy 
out  companies  and  substitute  public  for  private  op- 
eration. 

In  London  the  City  Corporation,  the  Camberwell 
Borough  Council,  and  the  Lambeth  Borough  Council 
have  the  right  to  buy  existing  plants  in  1927,  and  the 
London  County  Council  in  1931. 

In  1910-1911  the  following  47  local  authorities, 
which  were  operating  16  electrical  installations,  were 
doing  so  at  a  loss : 

Acton,  Alloa.  Bangor,  Barking  Town,  Barnstaple, 
Bath,  Batley,  Beckenham,  Bury  St.  Edmunds,  Bux- 
ton, Cambuslang,  Clacton,  Cleckhcaton.  Dorking, 
Dudley,  Elland,  Farnsworth,  Frotne.  Gillingham, 
Gravesend,  Hastings,  Hereford,  Hey  wood,  Hove 
( Aldrington),  Kendal,  Kingston-on-Thanics,  Kirk- 
caldy, Leek,  Loughborough,  Maidstone,  Middleton, 
Morley.  Paisley.  Rathmines,  Rcdditch.  Rhyl,  Staly- 
bridge,  Hyde,  Mossley.  Dukinficld,  Surbiton,  Tod- 
morden,  Torquay,  Wakefield,  Weymouth,  Whitby, 
Whitehaven,  Wigan,  Wishaw,  Worcester. 

/\  number  of  local  authorities  were  operating  at  a 
loss  during  the  preceding  year. 

»3S 


CHAPTER  XII 


TRAMWAYS    IX   GREAT   BRITAIN 

Tramways  in  dreat  I'>ritaiii. — (Opposition  of  t!ic  Municipali- 
ties first  to  Tramways,  then  to  tin-  Ommlius  Auto- 
mol)iIc. — The  I.ipht  Railways  Act  and  the  Municipal 
Journal.— The  Tramways  of  Glasgow  and  the  Street 
Railways  of  Boston. —  Hirmincjham. — The  Tramways  in 
the  United  Kingdom  and  in  the  United  States. — Paraly- 
sis of  Private  I'ndertakings  and  Weakness  of  Munici- 
palities.- -Policy  of  Arbitration  and  Privilege. — Shef- 
field:  Robbing  the  Poor  to  dive  to  the  Rich. — The  Lon- 
don County  Council  and  the  Tramways. — Advantages 
of  Employees. — Reduction  of  Transportation  Rates  at 
the  Expense  of  the  Taxjjayers. — Apparent  Profits  and 
Actual  Losses. — Situation  of  the  London  County 
Council  Tramways. 

When  in  1870  Mr.  Shaw  Lefevre  (the  present  Lord 
Eversley)  introdncecl  a  bill  granting  to  municipalities 
the  right  to  construct  tramways,  he  declared  that  his 
object  was  not  to  "'authorize  municipal  operation." 

However,  certain  municipalities  gave  the  bill  a  sig- 
nificance that  its  author  never  intended,  and  bv  inter- 
fering with  the  construction  of  tramways  bv  private 
comi)anies,  further  action  on  the  part  of  the  towns 
themselves  was.  of  course,  indirectly  promoted.  The 
bill  gn.ve  to  local  authorities  the  right  to  purchase  at  the 
end  of  21  years,  "by  paying  the  value  of  the  tram- 

136 


TRAMWAYS    IN    t.KEAT    BRITAIN 


ways,  buildings,  lands,  etc..  but  making  no  allow- 
ance for  past  or  futuro  profits  of  tbe  enterprise,  nor 
any  compensation  for  forced  sales  and  other  consid- 
erations." It  was  to  no  purpose  that  it  was  demon- 
strated to  the  committee  of  Parliament  that  a  period 
of  only  J I   years  was  too  short. 

As  a  result  the  tramways  already  constructed  suf- 
fered a  heavy  depreciation,  and  Knj^Iish.  capital,  which 
might  have  been  devoted  to  enterprises  of  this  char- 
acter, was  invested  in  foreign  countries.  The  large 
cities,  an.xious  to  keep  their  citizens  within  their  own 
limits,  for  fear  of  losing  ta.xpayers.  not  onlv  forbade 
any  extension  of  the  tramway  lines,  but  likewise  set 
their  faces  steadily  against  the  introduction,  first  of 
steam  tramways,  then  of  electric  tramways. 

The  act  oi  1870  did  not  apply  to  Ireland.  There- 
fore a  certain  contractor,  named  Murphy,  was  able 
to  make  a  proposition  to  Dublin  to  establish  electric 
tramways  there,  purchasable  only  at  the  end  of  42 
years,  at  an  increased  valuation  of  33  per  cent.  He 
even  offered  to  hand  over  a  fixed  percentage  of  the 
receipts.  But  the  partisans  of  the  municipalization  of 
tramways  in  England  and  Scotland  had  sent  delegates 
to  combat  these  proposals — a  proceeding  which  re- 
tarded their  acceptance  for  two  years. 

The  municipalities  appealed  to  the  act  of  1870  to 
prevent  the  construction  of  tramways  l)y  private  com- 
panies, and,  as  has  already  been  said,  opposed  every 
method  of  transportation  which  might  cc:>mpete  with 
their  own  enterprises.  In  1905  the  town  of  Newcastle 
fought  the  introduction  of  omniljus  automobiles  which 
the  Northeastern  Railw.ay  Company  intended  to  op- 

^37 


WHi.Ki;    AND    WHY    ITRI.K     (IVV  N'KKSII  H*    HAS    l-AIl.KD 

cratt'  mi  tlir  streets.  The  coiniiiittee  of  the  Municipal 
I'orpiiraiw  Ills'  Association  t^ranted  the  desired  aullior- 
itv,  hut  with  the  restriction  that  jiasseiiij^ers  could  not 
be  taken  up  en  route.  Mr.  I'.onar  Law.  parliamentary 
secretarv  ol'  tiie  Hoard  of  Trade,  opposed  this  reserva- 
tion, reiuarkint^ : 

"J'.veii  thuuf,'h  nuinieipalities  are  engaj^ed  in  an  indus- 
try, is  tliis  a  reason  for  giving  them  a  monoi)oIy  which 
would  not  h(j  grruited  to  anyone  else  in  the  husiness? 
The  (luestitm  whether  the  liouse  of  ("oinnions  is  to 
govern  the  niunicii)alities  (jr  wliether  tlie  municipalities 
are  to  control  the  1  louse  is  heginniiig  to  present  itself." 

The  restriction  was  rejected  by   127  votes  to   no. 

In  iS</')  Parliament  adopted  the  Light  Railways 
Act,  designed  to  facilitate  construction  of  such  rail- 
ways in  (Ireat  P)ritain ;  its  duration,  h(nvevcr,  was 
limited  to  five  vears.  .After  that  the  law  would  have 
to  be  repas  ed  each  year.  The  act  did  not  define  the 
light  railw.'.y,  and,  as  a  result,  tramways  have  been  in- 
cluded uiiiKr  this  title.  Therefore,  they  could  no 
longer  be  purchased  as  provided  in  the  act  of  1870.  At 
the  end  of  1903,  J44  reipiests  had  been  received  for  the 
application  oi  the  Light  Railways  Act.  involving  870 
miles  of  lines,  and  the  committee  had  authorized  127 
tramways  having  a  length  of  592  miles.  This  small 
proportion  indicates  the  pressure  brought  to  bear  by 
the  municipalities  upon  the  government  on  the  one 
hand,  and  upon  their  own  citizens  on  the  other. 

Ne\ertheless.  when  ir>  iQOi  Mr.  Gerald  Balfour, 
president  of  the  F'oard  of  Trade,  submitted  a  bill, 
asking  that  this  act  be  extended  for  a  further  period 

1.^8 


TRAMWAYS    IN    CRLAT    BRITAIN 


of  five  years,  he  met  with  the  violent  opposition  of 
the  Municipal  ( "orpnrat ions'  .Association,  an  orp^ani/.a- 
tion  designed  to  I'xtend  municipal  powers  and  to  in- 
tercede for  the  towns  with  the  government  and  Par- 
liament. 

Ihe  Municipal  Journal,  the  organ  of  the  Miniicipal 
Socialists,  observed:  "We  will  not  permit  this  hill 
to  take  a  permanent  place  on  the  statute  books.  The 
astute  j)romotcrs  of  tramways  have  simplv  found  in  it 
a  means  of  esca])ing  the  restricti(»ns  of  the  Tramways 
Act  of  i<S7o,  and  to  avoid  the  embarrassing  purchase 
clause."  The  Journal  continues:  "When,  at  some 
future  time,  the  rural  clistricts  are  able  to  ol)tain  their 
current  at  half  the  price  that  it  costs  to  purchase  from 
the  municipal  corporations,  the  consumers  in  the  large 
towns  will  no  longer  be  willing  to  continue  to  pay  the 
present  high  rate.  They  will  demand  to  be  placed  in 
the  same  category  as  the  consumers  outside  the  city, 
and  they  will  have  justice  on  their  side.  What,  then, 
will  become  of  the  municipal  electric  plants?"  .After 
two  attemjjts  Mr.  Balfour  withdrew  the  bill,  the  gov- 
ernment not  daring  to  enter  into  contlict  with  the 
association. 

In  i.^/O  Glasgow  was  granted  authority  to  con- 
struct and  operate  its  tramways.  It  did  not  decide  to 
do  so,  however,  until  1H94.  It  then  ntroduced  a  fare 
of  Yzd ,  and  raised  the  wages  of  its  emj)loyees.  In 
i8q9  it  exchanged  horse  cars  for  electric  cars,  binally 
the  municipality  decided  that  it  had  an  interest  in  own- 
ing all  the  property  along  the  tram  lines  beyond  its 
own  immediate  limits,  and  in  articles  in  the  Times,  for 
1902,  the  town  was  accused  of  having  devoted  to  real 

139 


UllKKE    AM)    WIIN     IMltl.lC     ()\V  N  KkMl  1 1'    11  AS    lAIl.Kl) 

estate  traiis.utioiis  profits  which  should  have  been  ap- 
plied to  \rd\u\^  otf  the  dcltt  on  the  tramways. 

In  ifjOJ-l()03  Mr.  lluj.,'o  Meyer,  an  American,  for- 
merly a  professor  in  the  I'niversity  of  Chicago,  made 
a  comparison  latwecn  the  tramways  situation  in  Glas- 
gow anil  that  of  the  street  railways  in  I'.oslon.  the  lat- 
ter owned  hy  a  ])rivatc  comjjany.  The  street  rail- 
ways in  Pioston  were  paying  the  city  a  sum  of  $4.^-.- 
500,  or  I, VI  l'<-'''  ^■'-■iit-  "*  ^'^'-"  k'foss  receipts,  ecpial  to 
44  cents  per  inhabitant.  The  Boston  elevated  railway, 
serving  a  ;  mailer  population  than  thai  of  rdasgow. 
pays  to  the  city  iti  cash  and  in  services  $1,550,000,  or 
nearlv  13  jjcr  cent,  nf  its  annual  income,  which  is  at 
the  rate  of  $i/)7  per  inhabitant.  In  IQ04  Boston  had 
one  mile  of  -t  reet  railway  for  every  2.300  inhabi- 
tants, while  (ilasgow  could  boast  of  only  one  mile  for 
6,700  inhabitants. 

Birmingham  imposed  such  conditions  upon  the  com- 
pany to  which  it  had  granted  a  franchise  that,  at  the 
en<l  of  1004,  it  had  only  one  mile  of  tramways  for 
8,700  inhabitants. 

In  i8qo  the  cities  of  the  United  States  having  more 
than  50.000  inhabitants  had  3,205  miles  of  street  rail- 
way; ICngland  alone,  proi)ortionally.  ought  to  have 
had  3,100.  'I'he  entire  L'nited  Kingdom  had  only  984 
miles.  In  i8<)6  the  United  States  had  10.000  miles  of 
electric  railways:  the  United  Kingdom  had  20.  It  is 
admitted  that  the  urban  population  of  the  United 
States  and  that  of  the  United  Kingdom  arc  the  same. 
In  June,  1902,  in  the  United  States  there  were  14,000 

140 


1I<AM\VAV>    IN    <;KK  \i     liUIIAIN 

miles  of  electric  railways  witlim  the  Innits  of  cities. 
Ill  March.  i«)04.  ''i  ll'^"  l'"it^''l  KiiiK'<l"Hi  iIk-'^^'  ^^'^^e 
only  3.-'00.  The  iiihahilants  of  I'.ritish  cities  thus 
have  at  their  (lispd'-al  less  than  one  (|nartcr  o!  the 
facilities  afforded  to  the  citizens  of  the  Inited  States 
by  this  method  •)f  transportation. 

Mr.  Meyer  sums  uj)  the  situation  in  his  hook,  en- 
titled MuHuil^al  Ownership  in  Great  Britain: 

"The  paralysis  of  private  enterprise  l)y  reason  of  the 
doctrine  that  the  profits  which  would  l>e  aade  hy  public 
utility  undertakings  established  in  the  streets  should 
belonf,'  to  the  pul)lic  and  not  to  "private  speculators'  has 
been  complete  and  permanent,  l^iually  complete  and 
permanent  has  been  the  powerlessness  of  municipalities 
to  nil  the  void  that  has  been  made  by  paralysing  private 
enterprise." 

77;('V  keep  others  front  doi\u]  what  they  do  not  do 
thewselres.  Such  is  the  true  result  of  the  efforts  of 
municijial  Socialists  in  En.t,dand. 

Municipalization  involves  an  arbitrary  policy  com- 
bined with  a  re,i,nme  of  privilege.     On  the  one  hand, 
we  have  taxpayers  who  are  making  contributions  m 
order  that  a  minority  of  users  may  have  gas  and  elec- 
tricitv.  or  that  the  passengers  in  the  street  cars  may 
ride  below  cost ;  on  the  other,  we  have  consumers  of 
gas.  as  at   Xottingham.  who  complain  that  they  are 
forced   to   i)ay   an   exorbitant   price    for   their    gas   in 
order  that  the  municipality  may  lower  the  taxes.'     At 
Sheffic'd  the  town  iiroposed  to  apply  the  profit  realized 
'  See  l\.  Davies,  The  Cost  of  Municipal  Trading. 

HI 


WHEKK   AND    WHY    PUBLIC   OWNERSHIP    HAS    FAILED 

from  the  tramways  to  cover  a  deficit  in  the  local  taxes, 
a  procecdinjT^  which  would  have  necessitated  a  rise  in 
tne  .ueneral  district  rate  of  2d  on  the  pound.  The 
workinunien.  however,  declared  that,  heins:^  the  true 
users  of  tlie  tramway,  the  al'eviation  of  the  local  taxes 
would  he  at  their  expense— a  policy  tending  to  rob  the 
])o()r  to  help  the  rich. 

Certain  tramways  were  taken  over  by  London  by 
virtue  of  acts  of  Parliament.  The  courts  interpreted 
these  acts  in  such  a  manner  that  the  stockholders 
found  themselves  despoiled,  while  the  London  County 
C"onncil  v  as  in  a  i)osition  to  become  proprietor  for  a 
sum  very  much  less  than  the  real  value  of  the  stock. 
It  was  thus  easy  enough  to  draw  at  least  temporary 
profits  from  the  enterprise.  The  Council  subsequently 
leased  the  tramways  north  fif  the  Thames  to  a  private 
companv,  hut  decided  t<»  operate  the  tramways  south 
of  it  on  its  own  account.  The  value  in  capital  of  the 
two  svstems  is  very  nearly  the  same,  £850,000  being 
invented  in  tne  northern  sys<;em.  and  £896,000  in  the 
southern.  The  northern  system  is  rated  for  tax  pur- 
])oses  at  £18,000  more  than  the  southern  system. 

In  1900  the  profits  of  the  northern  system  were 
£39,000,  and  those  of  the  southern  £51,774,  a  mag- 
nificent result,  which  might  .veil  he  cited  in  favor  of 
direct  o])eration  of  tramways  by  the  city.  lUit  this 
state  of  affairs  lasted  otdy  a  year.  During  the  follow- 
ing years  it  was  reversed: 

System  Operatbd      Municipal 
BY  THE  Company  System 

„)ni     £40,151  £U..P5 

KXi--     37.450  9,062 

rQ03 Loss  2,250 

142 


><»«? 


TRAMWAYS    IX    CKKAT    UK  IT  A  IN 


At  the  time  when  the  London  County  Council  under- 
took the  operation  of  the  southern  system  it  was  yield- 
ing a  net  profit  of  £64.000  ($311,680). 

Why  this  suhstitution  of  loss  for  profit?  The  fol- 
lowing reasons  have  been  given:  Increase  in  salaries 
of  employees;  establishment  of  the  lo-hour  day;  rate 
reductions;  and,  in  1903,  a  slight  increase  in  the  in- 
come tax. 

From  1900  to  1902  the  profits  of  the  southern  sys- 
tem were  £75,161  ;  those  of  the  northern,  £116,601 — ■ 
an  advantage  on  the  side  of  the  private  company  of 
a  difference  of  £41,440.  The  Statist  finds  a  greater 
difference.  In  an  a?  de  upon  the  tramways  nf  Lon- 
don it  observes:  "Since  1894,  the  date  on  which  the 
council  became  interested  in  tramways,  out  of  total 
profits  of  £320,581,  £314.347-  or  96  per  cent.,  have 
been  made  by  the  private  enterprise." 

In  order  to  justify  this  decrease  in  the  receipts  of 
the  municipal  undertaking  the  partisans  of  municipali- 
zation say:  "The  situation  of  the  employees  has 
been  improved."  Very  good;  but  if  this  improvement 
places  municipal  employees  on  a  different  footing  in 
the  way  of  salary  from  that  of  the  employees  of  pri- 
vate companies,  these  municipal  employees  become  a 
privileged  class  at  the  expense  of  the  whole  Ixxly  of 
taxpayers;  a  small  1  .nber  of  people  thus  profiting  at 
the  expense  of  ever ,  lody  else. 

"But  transportation  rates  have  been  reduced" 
Again,  very  good;  but.  if  transp(jrtation  constitutes  a 
loss,  the  gift  that  the  London  County  Council  is  mak- 
ing to  the  passengers  it  transports  is  being  paid  for  by 
all  the  taxpayers. 


WIir.RK    AND    WriV    IM'BI.IC    OWNERStlir    TT.AS    FAII.KD 


iMiiallv.  the  loss  has  l)ccn  ascribed  In  t!ie  nictliods 
of  electric  transportation  recently  intrcMluced.  But 
the  private  companies  have  also  had  to  introtluce  this 
change. 

Municipalities  operating  tramways  show  the  same 
weaknesses  as  the  states  which  oj)erate  railroads. 

In  i()03-ir)o6  the  southern  system  claimed  a  profit 
of  £4,CK-)0  ($19,480).  But  Mr.  llaward,  treasurer 
f)f  the  London  County  Council,  admitted  before  the 
committee  of  the  Municipal  Corporations'  .Associa- 
i'nm  that,  if  the  payment  of  the  penny  ta.x  per  car 
mile  for  renewal  had  been  enforced,  there  would  have 
been  a  loss  of  £4,000,  or  a  difference  of  £8,000. 

Now  the  London  County  Council  has  declared  that, 
since  1900.  the  southern  system  has  brought  in  £27,,- 
900.  The  difference  just  (juoted  of  £8,000  would  then 
reduce  this  profit  to  £15,900. 

The  report  of  the  auditor  of  the  Local  Government 
Board  (referring  to  the  accounts  of  1904-1905) 
called  attention  to  the  inadecpiacy  of  the  fund  devoted 
to  renewal,  as  well  as  to  the  custom  of  holding  the 
tramways  responsible  for  only  a  third  of  the  ex- 
pense of  maintenance  of  that  portion  of  the  streets 
which  they  occupy.  This  latter  custom  of  charging 
the  expenses  of  one  account  to  another  is  an  easy 
method  of  increasing  aT)parent  profits,  or  of  diminish- 
ing actual  losses.  In  any  state  or  municipal  enter- 
jirisc  it  is  very  difficult  to  obtain  honest  and  intelligi- 
ble accoimts. 

The  Statist,  of  June  30,  1906,  proves  that  the 
amount  set  aside  to  provide  for  wear  and  tear  (de- 
preciation), even  during  a  satisfactory  year  of  oper- 

144 


TRAMWAYS    IN    GREAT    BRITAIN 

ation,  is  only  ii  per  cent.  The  sinking  fund  is  2  per 
cent.  This  makes  a  total  of  3.1  per  cent,  a  year.  The 
figure  is  clearly  inadequate;  but,  if  it  were  increased, 
the  apparent  profits,  small  enough  at  best,  would  be 
changed  into  losses. 

1'he  following  table  shows  the  situation  of  the  Lon- 
don County  Council  tramways  at  the  end  of  the  fiscal 
year  ^nio-igii  (The  Municipal  Year  Book,  1912, 
page  618),^  when  the  debt  was  £9,455,500: 

L  s      d 

Receipts  of  operation   2,232,817     15     10 

Expenses  of  operation    1-337,769     I3       i 


Excess  of  receipts  over  operating  expenses. .        895,048      2      9 


Capital  charges  amounted  to  £662,231,  leaving  net 
receipts  amounting  to  i2T^2,y2y,  of  which  £129,229 
was  reserved  for  the  renewal  fund  and  £103,498  for 
the  general  reserve  fund. 

Results  clearly  prove  that  the  London  County 
Council  is  always  operating  at  a  loss.  The  report  of 
the  Highways  Committee  of  the  London  County  Coun- 
cil (see  The  Municipal  Year  Book,  19 12,  page  618 j 
states  that  the  tramway  receipts  for  the  year  ending 
July  10,  1912,  are  £633.588,  instead  of  £659,274,  the 
figure  for  the  preceding  year,  a  relative  decrease  of 
£26,000  from  the  previous  corresponding  period. 

The  report  declares  that  this  decrease  is  owing  to 
an  increase  in  the  competition  of  other  methods  of 
transportation.     The  tramways  carry  passengers  o.ily 

'  The  Municipal  Year  Book  for  1913  not  having  yet  appeared, 
I  must  make  use  of  the  figures  quoted  in  the  edition  of  1912. 


WIIFRF.    AND    WHY    Prm.IC    OWNERSHIP     H  ^       1  AU-ED 


i    ) 


(luring  two  periods  of  the  day,  wluk-  tlic  railway  tubes 
•md  the  motor  ..niuilmscs  travel  iIumukIi  crowded 
districts  during  the  middle  of  the  day.  'idieretore  the 
committee  demands  the  extension  of  its  system  upon 
these  streets.  It  has  submitted  a  preliminary  plan 
Nvhich  provides  for  an  added  expenditure  of  £600,000 

($2, 92  J, 000). 

Last  year  the  Highways  and  Improvements  Com- 
mittee proposed  the  construction  of  a  tramway  upon 
St.  I'aurs  bridge,  extending  to  the  west  end  <^f  Cheap- 
side.  The  London  County  Council  demantled  that 
the  bridge  be  used  to  connect  the  northern  an\  south- 
ern tramway  svstems.  The  cost  of  the  project  was 
estimated  at  f  T.^^i.-'oo  ( S7,Q43-9oo),  to  which  must 
be  added  £350.000  ($1,704,500)  dev.ianded  by  the  aty 
for  the  enlargement  of  St.  Paul's  churchyard,  ihe 
committee  insisted  upon  a  shallow  underground  tram- 
way between  the  southern  end  of  Cannon  street  and 

Cheapside. 

Tne  \^hole  report  and  the  plans  that  it  includes  re- 
veal the  mentality  of  these  administrations.  An  enter- 
prise is  not  successful.  This  unpleasant  state  of  affairs 
is  due  to  private  competition.  Then  drive  out  private 
compcuiion.  The  decrease  in  the  receipts  -'«  not  dis- 
quieting, -so  long  as  the  expenses  are  increased.  Con- 
se(|uently  all  sorts  of  extravagant  plans  are  pro- 
posed. 

Such  being  the  financial  results  of  the  operation  of 
the  Lniidun  County  Council  tramways,  its  partisans 
enumerated  the  following  advantages  (see  The  Mu- 
nicipal Year  Book.  1912,  page  t)ig)  : 

-  ,(^ 


TRAMWAYS   IN    GREAT    BRITAIN 

a  The  relief  of  the  tax  rates  from  the  profits  of 
the  enterprise. 

b  Institution  of  all-night  service. 

c  Workmen's  cars. 

d  Rate  rechictions  upon  many  lines. 

But,  above  all,  they  insist  upon  the  advantages  ob- 
tained by  employees   from : 

e  Establishment  of  the  lo-hcjur  day  for  all  em- 
ployees. 

f   One  day's  "est  in  seven. 

g  Increase  of  salaries. 

h  F\irnishing  free  uniforms. 

i    Annual  vacations  of  si.x  days  with  full  pay. 

j  Since  1909  the  establishment  of  a  conciliation 
board. 

V/hence  we  may  legitimately  draw  the  following 
conclusion:  Municipal  service  must,  above  all,  confer 
advantages  on  its  employees.  Such  undertakings  of 
right  belong  to  them. 

The  Municipal  Year  Book,  of  191 2.  publishes  the 
following  summary  of  the  situation  of  the  tramways 
and  light  railways  in  the  United  Kingdom,  accord- 
ing to  the  latest  reports  of  the  Board  of  Trade : 


Undertakings    owned 
(nuiTiber) 

Total     c.'ipital     outlay 
(pounds     sterling) 

Lines   open    (mile'^') 

Cost  per  mile 

(pounds     sterling) 


Local  Governments 
iQio-igtt  1P09-1910 


174 


176 


51,147,236      40.568,77s 

1. 744  "4         i.7io'4 


Increaae      DecreMe 


1,578,461 
34 


29.323 
147 


28/«3 


340 


WUF.RF.   AND    WHV    FUnT.ir    OWNKR^HIP    HAS    FAH.F.D 

Local  Governments  (Cnntinu^d) 

,q,o-iqii  looQ-'Qio        Inorewe        D«ore«M 
Undertakings  worked 

(number)    '3b  »3b 

Capital   outlay  o,  „,^ 

(pounds     sterling)       45,393.284  +4.108.250     1.285.034 

Tracks  operated  ,    . 

(miles)    1 .530'/.  i.503}4  ^^ 

Gross  receipts  ^^8r>, 

(pounds     sterling)         9.996,327        9487.434       50«.»93 
Working  expenses 

(pounds      sterUng)         6,146,947         5,887.243       259.704 
Ratio  to  income   (per  , 

cent.)    61.49  62.05         0.56 

Net  revenue  (pounds 

sterling)     3.849.380         3.6oo.igi         249,189 

Equivalent  return 

upon    capital     (per 

cent.)    8'/^  ^^  ^^ 

Car       distance       run  o   ^« 

(miles)     221,646,847     212,465,787    9.181.060 

Net   revenue   per   car 

mile     (pence) 4. 16  4-06  0.10 

Net  revenue  per  track 

mile    (pounds   ster- 

r      \  21;;;  2, '594  121 

hng)     2,io  •J'^t 

Passengers        carried 

(number)    2,231,731,6392,102.438,010  129,293.629 

Average  fare  per  pas- 
senger (pence)    ...  1-04  i-^S  o.oi 

The  following  table  gives  the  figurrs  for  the  tram- 
ways owned  by  private  companies: 

Private   Companies 

1910-19H  1909-1910         Increase     Decreaie 

Undertakings     owned 

(number)     '22  124  

Total     capital    outlay 

(pounds    sterling)         24.525.590      24,372.884        152.70O 
Lines    open     (miles)  852.14  Ssi'/^  m 

148 


TRAMWAVS   IN    GREAT    BRITAIN 


Private  Companies  (Continued) 

iQio-igii        igog-iQio        Increaas        DAoreaje 
Cost  per  mile 

(pounds    sterling).  28,760  28.623  137 

Undertakings  worked 

(mimber)    138  141  3 

Capital  outlay 

(pounds    sterling).       30,069,172       29,556,166       513,006 
Track  operated 

(miles)    1.059^  i.osi>'4  714 

Gross  receipts 

(pounds    sterling).         3,780,674        3,590,467        190,207 
Working  expenses 

(pounds    sterling).         2,353,994        2,244,871        109,123 
Ratio   to  income 

(per  cent)    62.26  62.52         00.26 

Net  revenue   (pounds 

sterling)     1,426,680         1,345,596         81,084 

Equivalent  return   on 

cauital    (per    cent.)  4^  4^^  J^ 

Car       distance       run 

(miles)     88,847,396      85,378,890    3,468,506 

Net  revenue  per  car 

mile    (pence)    3.85  3.78  0.07 

Net  revenue  per  track 

mile    (pounds   ster- 
ling)     1,346  1,279  67 

Passengers        carried 

( number)    675,445,481     640,751,429  34,694,052 

Average  fare  per  pas- 
senger (pence)    ...  1.24  1.24 

The  losses  reported  on  tramways  operated  by  local 
governments  in  1910-1911  affected  the  following  2y 
municipalities:  Birkenhead,  Blackburn,  Bourne- 
mouth, Colchester.  Darlington,  Dover,  East  Ham, 
Edith,  Ilkeston,  Ipswich,  Kilmarnock, Lancaster. Leith, 
Lincoln,  Lowestoft.  Maidstone,  Nelson,  Oldham. 
Perth,  Pontypridd,  Rawtenstall.  Southport.  Staly- 
bridge,  Hyde.  Mossley,  Dukinfield.  Widen. 

149 


WHERK    AND    WHY    PUBLIC    OWNERSHIP    HAS    FAILED 

The  abnve  tables  do  not  give  the  rates  of  deprecia- 
tion It  is  a  pity  that  The  Municipal  Year  Book  has 
not  included  them.  But,  besides  the  27  local  govern- 
ments \vhich  have  reported  their  losses,  there  are  no 
amounts  recorded  for  depreciation  and  reserve  for 
Derby.  Halifax,  Walthamstow.  West  Ham  (m  1909- 
i()io).  ^■armouth.  . 

In    one    of    the    best    administered    municipalities. 
Birmingham,   the  amount   set   aside   for  depreciation 
and  reserve  is  £24,413  tJUt  of  total  receipts  of  £318.- 
88j.  which  is  a  little  more  than  7.6  per  cent.       At 
Glasgow  it  is  £202.579  <nit  of  receipts  amounting  to 
£tj49  488.  or  more  than  21  per  cent.     This  difTerence 
between  the  two  figures  proves  that  the  first  is  too 
small.     The   advocates    of   municipalization   will   not 
fail  to  point  out  the  Glasgow  figure,  because  it  looks 
well  and   increases  the  average,  but  it   is  altogether 
exceptional. 

'  7.6  per  cent,  on   revenue  is  approximately  equivalent  to  1.5 
per  cent,  on  capital  investment. 


150 


CHAPTER  XIII 

HOUSING  OF  THE  WORKING  CLASSES   AND   PUBLIC 
OWNERSHIP    IX    GREAT    BRITAIN 

Condemnation  for  Sanitary  Reasons.— Expropriation  and 
Sanitation. — Dispossessing  and  Housing;.— Gross  Re- 
ceipts Apparently  Concealed. — Bookkeepin;^'  Artifices. — 
Miraculous  Results.— Comparative  l'iKure>.— The  Ac- 
counts of  Birmingham.— Glasgow. — Liverpool. — Man- 
chester. —  Sheffield.  —  Sal  ford.  —  Selecting  Tenants.  — 
Weakness  of  Group  and  Strength  of  Individnal  Initia- 
tive.— Edwin  Cannon. — Lord  Rosebery.— "You  Dispos- 
sess  More  Than  You  House."— Bernard  Shaw. 

In  a  bill  introduced  by  M.  Siegfried,  and  passed  by 
the  French  Chamber  ot  Deputies,  on  the  22nd  of 
April,  10 1 2,  as  also  in  a  similar  bill  providing  for  the 
condemnation  of  property  for  sanitary  reasons,  intro- 
duced by  M.  Honnorat.  reference  was  duly  made  to 
the  example  of  England  by  a  citation  of  the  Housing 
of  the  IVorking  Classes  Act  of  August  18.  1890. 

By  this  act  local  governments  are  authorized  to 
demolish  houses  ac.judged  unsanitary,  providing 
compensation  therefor,  it  is  true,  but  with  deductions 
in  the  amounts  allowed,  based  upon  the  different  de- 
grees of  existing  overcrowding  and  lack  of  sanita- 
tion. Later  the  legislators  made  up  their  minds  that 
they  were  not  doing  their  duty  by  simply  putting  the 


WHERK    AND    WHY    I'V'HI.ir    OWNKKSIIIT    II. \>    lAILED 


inmates  ot'  Mich  housi-s  into  the  street  ui  order  to 
improve  their  condition.  Therefore,  they  proceeded 
to  authorize  the  towns  to  construct  and  even  to  man- 
age houses  for  the  working  classes,  granting  them  a 
right  (jf  condemnation  in  order  to  procure  the  neces- 
sary land.  If  the  towns  failed  to  provide  as  many 
lodgings  as  they  had  destroyed,  or  if  they  were  not 
provided  untd  a  long  time  afterward,  so  much  the 
worse  for  th(Kse  who  had  been  dispossessed. 

The  energy  in  this  direction  of  the  London  County 
Council  is  pointed  to  with  admiration  and  enthusiasm 
by  all  interventionalists. 

According  to  its  rejjort  of  October  7,  191 1,  the  Lon- 
don County  Council  had  carried  out  altogether  35 
plans  of  expropriation  and  reconstruction  from  iSt)^ 
to  March  11,  1911.  It  had  demolished  buildings  con- 
tainitig  nearly  23,000  rooms,  occupied  by  42.000  per- 
sons, and  furnished  rooming  houses  (jccupied  by  about 
3.000  people,  or  in  all  45.000  tenants.  It  iiad  con- 
structed buildings  aggregating  6.428  rooms,  2,519 
cottages,  and  three  lodging  hous'^s  with  i  .S49  bed- 
rooms for  single  men.  Counting  2  persons  to  a  room 
in  these  houses  the  Ctnnicil  had  thus  lodged  51,836 
persons. 

During  the  period  mentioned  a  cajjital  of  £2,879,000 
($14.02 1. CXDO)  had  been  invested  in  these  undertak- 
ings, bringing  in  a  gross  income  of  £207,340  ($1,009,- 
700).  Interest  and  sinking  fund  cliarges  on  a  60 
years'  basis  absorb  40. ('O  per  cent,  of  the  receipts.  The 
expenses  of  management,  including  repairs  (7.52  per 
cent.),  taxes,  water,  light,  etc..  represent  39.78  per 
cent,  of  the  gross  receipts,  uncollectible  rents,  0.19  per 


HOUSlNt.    OF    TIIK    WOKKINC    CLASSES 


til 


cent.,  and  losses  mi  worthless  paper  9.51  per  cent. 
Thus.  \\e  dispose  .  t  9().oS  per  cent,  of  the  gross 
receipts,  and  reach  tiie  followin^f  imposing  result: 

"This   gigantic    h.-uMiip   undcrf.iking   is   entirely   self- 
pporting.  without  recourse  to  tlie  i^ent  ral  resources  of 
e  l.ud-et.     It  even  yields  profits  which  vary  from  iy>^> 
to  ahout  £1,100." 

But  all  the  expenses  for  these  tnunicipal  lodgings 
were  not  charged  to  the  mmiicipal  lodgings  account,  as 
the  fnlldwing  fact  shows: 

When  the  T.nudcMi  Countv  Council  jiaid  £200.000 
($974,000)  for  the  site  of  the  Keid  hrewery.  it  entered 
the  propertv  on  the  housing  account  at  £45,000  and 
charged  the  remain-ng  £i.",ooo  to  the  general  im- 
provement account.' 

For  the  vear  ending  March  ;,i.  iQii.  the  total  ex- 
pense for  condemnation  and  construction  was  £2.013,- 
833.  and  the  income  ii.Sjf^:  that  is  to  say.  less  than 
nothing.  With  the  addition  of  £120.242  for  admmis- 
tration^  costs,  the  deficiency  of  revenue  is  .f305O. 
which,  of  course,  m(^re  than  absorbs  the  small  surplus 

noted  above. ^ 

All   richt.   sav   the   advocates   of   municipalization. 

Business  f-s-  bad.'  from  the  financial  point  of  view,  but. 

from  the  standpoint  of  sanitation,  a  service  has  boon 

endered    for   which   too   high  a   price   cotild   not   be 

Out  of  a  population  of  4.537.0^0  people  the  London 

'The  Times  (London).  October  21,  1902. 
*Municital   Year  Book.   1912.  page  752. 


i 


WHFRK    AND    Win     I'l'IU  IC    OWNKKslIll-     l|\S    l-AUKD 

Coiintv  CiiiiiKil  has  flisposscsscd  about  4;o()o  iiuli- 
vuliials.  It  has  hdustd  5i,^^5^>  It  has  not  creatiMl 
ninv  homes:  it  has  only  hrouu;ht  alioiit  (lisi)Iaci'nients. 
I'dr  it  1-  scarcflv  i)rol)alilc  thai  the  victims  of  these 
f(>reil)le  evictions  occupy  the  new  or  reconstructed 
municipal  lod^inu^  houses. 

In  the  report  of  the  I'ommission  of  the  Municipal 
Council  of  r.iris.  on  the  suhject  of  cheap  housing;.  M. 
koussclle  and  his  collaborators  say; 

"W'c  can  testify  to  the  fact  that  for  several  years 
tiie  mortality  due  t(j  tuberculosis,  which  in  I'aris  is  still 
34  out  of  every  i  ,oo<;)  inhabitants,  has  fallen  in  London 
from  (x)  to  ig  inhabitants  per  thousand.  This  outcome 
is  owinpj  in  larpe  measure  to  the  work  undertaken  by 
the  London  County  Council,  a  work  which  this  single 
result  would  serve  to  justify,  if  such  justification  were 
necessary." 

In  other  words  the  London  County  Council  moves 
I  per  cent,  of  the  population  and  the  mortality  from 
tuberculosis  immediately  drojjs  b6  per  cent. 

This  result  is  tndy  miraculous,  hut  the  most  strikinp^ 
feature  of  the  whole  statement  is  the  tremendous  dis- 
proportion between  given  cause  and  effect. 

In  connection  with  municipal  housing  in  Plymouth 
The  Municipal  Year  Book  ^  gives  the  following  data: 

Average  Mortality  per  i.ooo 

1806-1005  1886-1805  Decrease 

18.47  21.21  2.47 

This  reduction  equals,  we  may  add,  325  lives  saved 
annually. 

^Municipal  Year  Book,  1012,  page  775. 

o4 


w~- 


HOi;.slN(i    (II      Mil-     \\(tKKIN(.    CLASSES 

Novv.  llir  (  (iiimil  (if   IM\ timiitli  1i;in  iMii^tnicted  : 

1°     »><H  riKims 

2°     fot>       " 

Total    «ro       " 

Witlunit  overcrowding;,  not  tnorc  thai)  two  persons 
can  well  he  counted  to  a  room.  This  i^'ves  us  1.740 
inhahitants  housed  out  "f  a  i^jpulation  nt  uiore  tiian 
I25.0(:k).  it  is  a  little  difticult  to  see  how  the  liousim,' 
of  1,740  people  can  po.-^sihly  save  the  lives  of  ]J\  per- 
sons each  vear. 


At  liirniin^hani  buildintjs  were  demolished  under 
pretext  of  sanitation,  hut  the  land  wis  not  used  to 
i)uild  tiew  houses  for  the  working  classes. 

Mr.  J.  S.  Nettleford.  president  of  the  Housin.£,' 
Committee  of  IJirniingliam.  testitied.  in  i(;o5,  that  the 
rents  of  the  houses  on  Ryder  and  Lawrence  streets 
were  far  above  the  means  of  the  imfortunate  tenants 
(hspossesscd  by  the  iniprejvement  committee.  The  re- 
sult of  these  improvements  has  therefore  been  the 
taxation  of  the  many  for  the  beneht  (jf  a  few  indi- 
viduals,  "a  detestable  commercial  operation." 

The  Estate  Committee  published  accounts  in  which 
there  was  no  nientioti  whatever  made  of  the  value  of 
the  land  upon  which  the  houses  were  built.  Rut  a 
little  note  appeared  at  the  bottom  of  the  pajj^e.  say'ng 
that  the  credit  balance  was  equal  to  a  ground  rent  of 
X  per  vard.  .\t  the  conference  of  June  7,  1901,  a 
councillor  demanded  the  price  of  the  land ;  where- 
upon it  was  found  that  an  investigation  would  be  ncc- 

33 


WHFRK    AND 


WHY    ITItllC    OWNHRSllIl-    HAS    FAILED 


I    / 


cssarv  in  r.rdcr  to  discover  it.     Mr.  Nettleford  »  quotes 
tlic  results  e)l)tained  from  this  investigation: 


A(  rounts  of  the 

CiOTinittcc  Ex- 

cludinn  I'nLU 

of  Land 

Credit  Balance 
Ryder    Street;  i      s     d 

22   cottages 83     I     5 

Milk    Street: 

61    cottages 140  10     2 


Accounts  In- 
cluding 
I'ruc  'if 
Land 

Debit  Balance 

£        S      d 

153     3     7 

3H3  10    2 


Charges  per 
Lo  IginE  and  per 

WpLk  to  be 
M  -t  by  Taxation 


d 
8 


Birmingham  does  not  appear  to  have  kept  up  the 
experiment. 

(;ia^g<nv  (8oJ,ooo  inhabitants)  oMumcnced  razing 
l,uildini;s  in  iSf.h.  Naturally,  it  s.>nn  found  itself 
saddled  with  an  over-sui)i'ly  of  land  uhich  tlie  author- 
ities were  anxious  to  sell  at  exorbitant  prices.  As  no 
purchasers  ^vere  to  be  found  under  such  ron.litions  the 
corporation  decided,  about  1888,  io  build  cm  its  own 

account. 

Instead  of  houses  designed  for  workingmen  the  cor- 
poration constructed  type.-,  of  buiUlings  more  in  keep- 
ing with  the  costly  sites  on  which  they  were  to  be 
built  On  Mav  31.  IQO^,  the  net  cost  of  these  struc- 
tures amotmted  to  £1.2.44.033  ($^'.05^.440).  while  the 
value  of  the  lands  and  of  the  buildings  was  -jstimrted 
;U  £92:5.16^  ($4.49^-«^oo)-  -^  ^ef^^it  of  £320.868 
I  $1,562,640)  was  the  t^nal  result.  Fifty  thousand 
people  were  driven  out  of  the  slums,  but  the  city  did 
not  furnish  them  ^vith  lodgings.  Instead,  it  con- 
st rtuted  imiH.sing  houses  and  shops.  Moreover,  while 
awaiting  the  destruction  of  the  condemned  buildings, 

'  A   Uousxni]   Policy. 


HOUSING    UF    THE    WORKING    Cl-ASSES 

the  improvement  trust  continued  to  rent  the  ninst  un- 
sanitary f)f  these  buildings. 

In  191  I  the  i.ct  result  of  the  whole  niovemenl  was 
J.  1 49  lodgings  for  the  families  of  the  laboring  classes. 
The  income  from  them  is  £25,000  ($121,750).  which 
allows  a  payment  of  314  per  cent,  interest  and  one- 
third  of  the  amortization. 

Liverpool  has  759,000  inhabitants.  It  has  con- 
structed buildings  representing  i  total  of  2,686  lodg- 
ings. Condemnation  and  reconstruction  have  cost 
£i,oo<3,ooo.  In  1909  the  net  income  was  £21,711, 
or  2.17  per  cent.  The  losses  on  worthless  paper 
amounted  co  6.74  per  cent.  Taking  into  account  re- 
pairs, costs  of  administration,  etc.,  the  city  of  Liver- 
pool collects  iljd  ])cr  pt)un(l  sterling  invested. 


In  Manchester  (865,900  inhabitants)  the  financial 
results  have  been  similar  to  those  of  Liverpool.  Be- 
tween 1845  and  1905  the  city  has  rented  7,432  houses. 
3,334  having  been  reopened  after  being  renovated. 
The  net  income  in  1910-1911  was  £7.262  or  3.80  per 
cent,  on  a  capital  investment  of  £189,366.  After 
deducting  interest  and  sinking  fund  there  is  a  loss 
of  one  penny  per  pound. 

Leicester     (222,242    inhabitants)    has    constructed 
two  buildings,  containing  42  apartments. 


Richmond  (36,493  inhabitants)  has  built  135 
houses,  which  are  bringing  in  £2,455  annually  to  ofT- 
set  an  outlay  of  £38,683. 

157 


WHl-.UI-.    ANT)    \\\\y    in-lU  IC    C)\^  .M.KSIill'     HAS    l-AILKD 

Folkstfti.e  (36,000  inhabitants)  constructed  ^,0 
houses  and  tlicn  stopped. 

At  Shcfnold  the  corporation  bouc;ht  a  three-mile 
tract  ot  land  on  tlie  side  of  a  hill,  in  the  nei,t,dil)()rhoi)d 
of  very  valuable  real  estate.  It  was  said  that  the 
object  uf  certain  municipal  coimcillors  was  to  play  a 
good  joke  on  the  owners  of  this  property.  In  the  end 
the  citv  was  nni  only  forced  to  buy  more  land,  in 
order  to  construct  a  roundabout  road.  but.  b\-  an  order 
of  the  King's  Bench  Division,  it  had  als(j  to  pay  a 
considerable  indemnity  to  the  aforesaid  proprietors 
lor  the  depreciation  in  value  of  their  property. 

Salford  (231.380  inhabitants)  has  displayed  vei  / 
great  activity  along  the  direction  of  housing  the  work- 
ing classes;  2.23O  houses  have  been  declared  unfit  for 
habitation,  and  -'.q.S-'  others  have  been  reconstructed. 
In  addition  to  these  effoits.  one  building  containing  69 
apartments,  405  four-r.  nm  houses,  134  with  five 
rooms  each.  9:  with  6  rooms,  or  in  all  703  lodgings, 
have  been  pr  >id"(l.  idKu  a  cheap  hotel,  with  285 
rooms,  and  a  building  containing  32  shops  have  been 
also  built.  The  average  rent  is  I  shilling  4  pence  per 
vveek,  while  in  the  rest  of  the  city  5s  and  5s  9d  arc 
paid  for  a  4-rooni  lodging. 

Rut  since  the  motives  which  actuate  committees 
appointed  to  select  tenants  may  be  of  various  kinds 
and  more  or  less  complex,  it  is  customary  for  such 
bod\s  to  favor  tenants  who  are  willing  to  offer  a 
higher  rent. 

158 


HOUSING    OF    TH1-:    WORKIVG    CLASSES 

Here  we  have  the  sketch  of  the  great  nuinicipal 
work  of  cheap  housing  in  (ireat  P.ritain.  Tlie  Lon- 
don County  Council  has  evicted  45,(J0()  persons  au'l 
lodged  51,000.  Fortunately  there  are  still  a  few  in- 
dividuals or  private  groups  who  construct  houses, 
-*,jrwise  the  4,486,000  inhabitants  of  the  city  of 
i^ondon,  for  whom  municipal  lodgings  are  not  pro- 
vided, would  be  condemned  to  dwell  in  the  open  air. 

But  the  action  of  the  London  County  Council  has 
at  least  brought  about  one  result,  for,  since  icSHc),  no 
more  great  associations  are  being  formed  in  London 
for  promoting  public  housing. 

But  has  any  service  been  rendered  to  the  people 
by  this  attempt  to  paralyze  private  initiative?" 

"Every  house  which  is  built  by  public  authority," 
says  Mr.  Xettleford,  "prevents  the  construction  of  at 
least  four  houses  which  would  have  been  built  by  indi- 
viduals," and  he  cites  striking  examples  from  Bir- 
mingham. 

"The  partisans  of  municipalization  conduct  you,"  says 
Edwin  Cannon,  "past  thousands  of  houses,  lodging 
tens  of  thousands  of  inhabitants,  to  a  half  dozen  houses 
built  at  a  loss  by  the  municipality  and  then  sa>  to 
you  solemnly:  'Private  initiative  is  weak";  when 
all  the  time  the  facts  are  demonstrating  the  strength  of 
private  and  the  weakness  of  municipal  initiative."  ^ 


When  the  inhabitants  of  the  slums  do  not  go  to 
!ivo  1  the  municipal  houses  the  advocates  of  Munici- 
p..    Socialism  say:     "But  they  can  occupy  the  lodg- 


The  Economic  Outlook. 


159 


WHKRK    AM)    WHY     I^JRIIC"    ()\V  M.kSI  f  1 1'    HAS    KAU.EU 

iiigs  left  vacant  by  tlujse  whu  iU>  conic  to  li\H  in 
thcni." 

The  dispossessed  are  simply  driven  from  hovel  to 
hovel;  they  are  not  housed.' 

Lord  Rosebery,  in  a  speech  delivered  at  Shoreditch, 
at  the  ceremony  of  the  opening  of  the  \vorkn>en's 
h(nises,  said:  "N'ou  have  lodged  300  families,  but  you 
have  dislodged  many  more.  That  seems  to  me  a 
droll  way  to  house  the  ])oor." 

Socialists  are  acknowledging  the  defeat  c;f  imc 
movement.  Bernard  Shaw,  hinsever,  while  pointing 
(>ut  the  practical  impossibility  of  establishing  municipal 
l(jdgings.  concludes  that  the  only  solution  to  the  prob- 
lem is  the  municipalization  of  the  soil. 

'  Boverat,     Le    Socialisme    Municipal    en    Anyleterre    et    les 
Resuttuts  tinanciers. 


160 


CHAPTER  XIV 


HOUSING  OF  THE   WORKING   CLASSES  ON   THE 
CONTINENT 

i.  Housing  People  of  One  Class  at  the  Expense  of  Those 
of  Another. — Private  Initiative. — The  I'all  of  the 
City  and  Return  to  the  Soil. — Pretexts. — Foreign  Ex- 
amples. 

2.  Germany. 

3.  Italy. 

4.  Belgium. 

5.  Holland. 

6.  Svvitzt-rland. 

7.  Austria. 

8.  Tlungary. 

9.  Sweden  and   .Norway. 

10.  Conclusions  of  the  Report  of  the  ^    inicipal  Council  of 

Paris. — Denying  Facts. — The  Strength  of  F^rivate  Ini- 
tiative.— Weakness  of  Municipal   Efforts. 

11.  Conclusions. 

I.  There  are  men  who,  full  of  sympathy  for  their 
fellow  men,  wish  t<>  hotise  them,  feed  th«m,  and 
dress  them,  hut  at  hose  expense?  The  trouble  is 
ilicy  want  to  house  people  >)f  one  class  at  the  cost  of 
another. 

Of  late  years  the  activity  of  the  partisans  of  munici- 
palization and  socialism  has  been  turned  toward  the 
housing  of  the  working  classes,  as  if  the  term  "work- 
ing classes"  alone  were  not  sufficient  to  indicate  the 
retrogressive  character  of  sucn  measures.     Thev  are 

161 


WHFRI      \.Ni>    WHV    I'lIUI.IC    OWNERSHIJ'    HAS    FAILED 

in>lrMiiU'nt.iI  in  creatiiii,^  a  ila-^^  apart  wli^i  air  tu  lio 
protected  by  other  classes,  utterly  oblivious  (jI  that 
sjjiril  III  eijuality  inculcated  by  the  motto  of  the 
Fretuli   Republic. 

llie  interventioiialists  denounce  the  weakness  of 
pri\ate  initiative,  as  thouij;li  up  to  the  present  it  had 
not  been  responsible  for  the  development  of  the  cities 
which  these  same  individuals,  from  an  entirely  differ- 
ent standpoint,  so  bitterly  dephjre.  It  never  seems  to 
occur  to  them  that,  by  deluding  the  people  of  the  rural 
districts  into  thinkiiiij;  that  they  will  be  otTered  desir- 
able and  more  or  less  i^ratuitous  homes,  they  are  in- 
tluencinii^  them  to  leave  the  farms  for  the  city.  Their 
real  m(iti\es  are  concealed  with.in  such  va<^ue  terms 
as  "public  health."  and  "the  housinjL^  crisis." 

N(ir  are  IVeiich  intiTvcntiniialists  of  all  kinds  ever 
at  a  loss  lor  I'oreij^ni  e\aiiiple>.  Tn  their  rej)ort  to  the 
Municipal  Council  of  I'aris  (  i()i_M.  uj)on  the  housing 
crisis,  and  the  creation  of  cheaii  hi  )ine>.  concluding 
with  the  recommendation  for  a  loan  of  2(X3,0()0,ooo 
francs  i)v  the  city  of  I'aris  for  the  purpose  of  con- 
structing cheap  lodgings.  MM.  Henri  RousscUc,  F. 
P.runet,  I^.  Desvaux,  am!  D'l  lerbecourt  review  the 
legislation  and  ])ractice  oi  foreign  countries.  We  con- 
gratulate them  upon  having  at  least  made  the  attempt 
to  sup])ort  their  thesis  upon  facts. 

2.  Germany: 

In  dermanv  it  is  customary  for  municipalities  to 
ask  for  a  direct  loan  troni  private  ass  ,ciation>  and 
individuals  and  to  supplement  the  sums  so  raised  by 
municipal  loans. 

162 


11 

Ij 


\ 


Hoi  SIN-.;  oi--   nil    woRKrxc  ci.assfs 

Dussel(I.)rt  iM.rnnv.  „,,  t,,  (,>  per  ccK.  ..f  the  value 
of  Its  .nvcstn.cnt.  w„h  a  <._.„  per  eent.  prennn.n  ia 
the  rate  of  is^ue. 

Frankfort  (414,400  inhabitants)  has  constructed 
an(l  rents  63  houses,  containing  366  apartments. 

<-lni  {57,500  inhabitants)  has  i)n)vicled  separate 
'•ouses,  of  which  the  fan.ily  I,„lged  therein  becomes 
proprietor.  During  the  years  s.nce  1891  it  has  owned 
2,131  hectares  (5.263  acres)  of  land.  It  has  managed 
to  d.spose  ot  35.  The  city  of  Ulm  congratulates  it- 
self upon  the  results  it  has  achieved.  Everything 
depends  upon  your  point  of  view. 

In  1S96  Strassburg  (  ,73,_>.So  inhabitants)  began  to 
construct  houses  and  to  manage  them  directly : 'it  now 
owns  II  buihungs.  containing  98  apartments,  occupied 
In'  372  people.  * 

liorlin    (2064,000   inhabitants)    has   done   nothing 
along  these  lines;  nor  ha.  Hamburg  (802,800  inhabi 
tants)   any  muninpal  lodging  enterprises 

f're.burg  im  Hreisgau  (85.000  inhabitants)  owns  77 
bou.ses.  c.Mitaining  266  lodgings,  and  costing  i  2>=  000 
"Kirks  ($294,000).  which  sum  was  advanced  a~t  '3  7  = 
per  cent,  interest  by  the  savings  banks.  It  was  esti- 
mated that  the  rent  should  bring  in  S-'^^  per  cent 
on  the  caf)ital.  •     -     r 

Mjigdelmrg  (279.600  inhabitants)  has  constructed 
7  iJuildings.  containing  50  apartments. 

Barmen  {  iyo.iHn>  inhabitants)  has  constructed  7 
iHiiklings,  containing  50  apartments. 

Kmden  (20.000  iniiab^tants)  has  constructed  --S 
bouses.  I  he  capital  inx  csted  by  the  village  brings  "in 
3- 50  per  cent,  to  4  per  cent. 


W  1 1  1  IM       \  M  > 


WHY     IMMII  IC    OWNKHSIIIP    HAS    KAII-EO 


Dk  (Icn  (  347.000  inhabitants)  lias  constructed  "out 
of  rcN'iiirrc^  provided  by  the  Krcnkcl  Uund"  a  model 
group  of  5  houses,  each  containing  34  separate  rooms. 
"In  this  work  the  (juestion  of  fmancial  return  has  been 
considered  as  wholly  secondary."  As  a  result,  the 
inhabitants  of  these  houses  are  a  privileged  class,  who 
enjoy  all  sorts  of  advantages  and  pay  25  per  cent,  less 
than  the  usual  rents.  With  the  help  of  the  Krenkel 
Fund  the  citv  has  also  undertaken  the  construction  of 
two  other  buildings,  containing  36  apartments. 

Munich  (505.000  inhabitants)  has  devoted  1,040,- 
000  marks  ($249,600)  to  the  construction  of  15 
house>,  containing  167  apartments,  for  laborers  and 
other  employees  of  the  city. 


3.   Italy: 

Louis  Rousselle  quotes  these  words  of  Garibaldi, 
spoken  at  the  time  of  the  concjucst  of  the  two  Sicilies: 

"A  government  ^j)rniig  from  the  peoi^le  is  before  all 
else  bound  to  pr(ni(le  for  the  first  necessity  of  the  peo- 
ple— commcKlious  and  sanitary  homes  at  a  moderate 
cost." 

Certainly,  if  any  people  were  ever  badly  housed  it 
was  the  Xeapolitans.  1  saw  some  of  their  hovels  a 
long  time  after  Garibaldi  had  pronounced  these  wo^ds. 
No  change  had  been  wrought  by  them  in  the  hlth 
and  miserv  of  the  majority  of  the  population.  How- 
ever, the  true  home  of  the  laz::cronc  is  the  shore. 
The  children  swarm  in  the  sun.  and  the  sea  air  counter- 
acts the  pestilential  atmosphere  of  the  home. 

The  Italian  lav  of  May  31,  IQ03— modified  in  1907 

164 


I 


HOUSING    OF    T1IF-.    WOKKINT,    Ct.ASSKS 

—lias  constituted  nii  autoiioiiKms  institution,  "a  sort 
of  financial  organization  u -th  social  intentions,"  to 
quote  tlie  expression  of  Luii,M  Luzzatti,  recently  Min- 
ister of  Foreign  Affairs. 

Public  construction  and  control  of  such  works  are 
in  force  only  in  Venice,  {'arnia.  Reggio,  Knielia.  Vin- 
cenza.  Sestri-Poncnte.  and  Carrara. 

Venice  (167,000  inhabitants)  owns  39C  houses, 
lodging  2.000  persons. 

Parma  (51,300  inhabitants)  has  8_'  houses  contain- 
ing 508  rooms,  and  sheltering  130  families,  or  724 
people. 

Sestri-Ponente  (23,100  inhabitants)  has  11  houses, 
each  containing  20  apartments. 

4.  Belgium  : 

Brussels  (195.600  inhabitants)  has  appropriated 
smns  for  housing  purposes  amounting  to  2.500.000 
francs  ($475,000).  But  our  report  declares  that  it  is 
necessary  to  subtract  half  as  devoted  U)  sanitation. 
Thus,  1,250.000  francs  ($237,500)  remained  to  be 
applied  to  the  experiment.  On  this  basis  the  net  cost 
ot  one  rented  room  is  3,575  francs  ($679).  It  is  all 
quite  simple. 

The  Commission  estimates  the  total  charges  at  from 
15  to  30  per  cent,  (jf  the  rent.  The  bonds  of  the 
city  of  Brussels  were  issued  at  about  2.70  per  cent., 
interest,  premiums  and  amortization  included.  The 
anni'.al  rent  of  one  rocmi,  taking  into  account  the 
higher  rent  of  small  shops,  will  be  aliout  98  francs 
5'   ($18.72). 

Saint  Gilles-pres-Bruxelles  (63,000  inhabitants)  be- 

165 


1 


WUKkK    AM)    Win     I'lRI.U     OWNKK.UIII'    HAS    lAII.Kl) 

gan  in  l8<;4  with  5  small,  oiic-story  hmisos.  l.ator  tlii> 
system  was  ahandoncd,  and  the  town  now  has  a  grou]) 
of  tenement  h«nises,  co'ni)rising   130  lodj^nngs. 

The  loans  contracted  by  the  niumcii)ality  are  issued 
at  3.25  per  cent.,  witli  an  amortizati(jn  charge  of  44 
centimes  (<)  cents ),  or  49  centimes  (10  cents).  This 
appears  ab(jut  to  equal  tlie  average  income. 


5.  Holland: 

A  law  of  1853  permits  officials  entrusted  with  the 
duty  of  looking  out  for  house  sanitation  to  enter  any 
building,  even  in  the  night.  The  law  of  Jtme  _'_', 
191 1,  confers  ujjon  municipal  councils  the  right  of 
preventing  the  occupancy  of  unsanitary  builduigs  and 
of  regulating  the  numl)er  of  people  to  a  house.  But 
no  city  has  constructed  or  rents  houses. 

6.  Switzerland: 

Geneva  (145,000  inhabitants)  has  constructed 
buildings  containing  .1  ^   apartments  and    1 1 1    rooms. 

Lausanne  (65,000  inhabitants)  has  constructed  8 
houses,  containing  a  total  of  24  apartments. 

Zurich  (191,200  inhabitants)  began  by  building 
houses  for  its  municipal  enii)loyces.  In  1907  it  erected 
25  buildings,  containing  225  apartments;  in  1910  it 
constructed  228  apartments,  and  76  attic  rooms.  It  is 
now  planning  to  construct  370  new  hou.ses. 

Bern  (85,000  inhabitants)  built  134  small  houses, 
containing  182  apartments  in  1895,  and,  in  1898,  25 
new  houses. 

Neuchatel  (23.600  inhabitants)  has  built  houses 
containing  47  apartments. 

166 


HOUSIN(.    OF     I  HE    WOKKING    CLASSES 

7.   ArsiKi.v.: 

In  \')ii  a  j)lan  \va>  discussed  in  Vienna  (  n)i)().- 
900  inhal)ita^t^ ),  iiuolvinjj;  an  outlay  of  480.OCK) 
crowns  ($(/),o(K)).  tOr  the  eonstrm-tion  <>{  tcniporarv 
homes  for  the  homeless. 


8.   Hingary: 

In  1908  the  Hungarian  government  proposed  to  the 
Chamber  of  Deinities  to  Iniild  a  group  of  houses  in  the 
suburbs  (jf  the  city  of  Budapest  (791.700  inhabitants) 
capable  of  sheltering  from  S,0()(;  to  10,000  families.  A 
credit  of  12.000,000  crowns  ($2,400,000)  was  opened 
to  the  ministry  of  iMuance.  and  a  tract  of  land,  con- 
taining 169  hectares  (417  acres),  was  bought  at  Kis- 
pest,  while  in  the  tenth  district  a  second  tract,  contain- 
ing yy  hectares  (  190  acres ),  was  purchased.  On  May 
I,  1911,  970  apartments  were  finished.  In  1912,  2.000 
(.ther  lodgings  were  to  be  open  to  rent.  The  work  is 
to  be  finished  in  19 14.  As  tenants  the  preference  is 
given  to  laborers  and  subordinate  employees  of  the 
government.  These  houses  are  exempt  from  state 
taxes. 

In  1909  the  burgomaster  of  Budapest  asked  for  an 
appropriation  of  69,000,000  crowns  ($13,800,000) 
for  the  construction  of  cheap  lodgings.  In  all  the  city 
has  constructed  26  buildings,  containing  1,600  apart- 
ments, and  costing  27,000.000  crowns  ($5,400,000). 
On  September  19th  of  the  current  year,  it  was  decided 
to  construct  i.ooo  more. 

A  special  feature  of  the  lodging  schemes  of  Buda- 
pest has  been  the  establishment  of  temp(jrary  settle- 
ments, containing  3,000  apartments,  and  expected  to 

167 


MICROCOPY    RESO'.UTION    TEST    CHART 

(ANSI  and  iiO  TEST  CHART  No    7, 


1.0 


I.I 


2.8 


161 

It  im 

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1.8 


1.25 


1.6 


A     APPLIED  IM^GE 


1653    East    Mam   street 

Rochester.    Ne»    Vork         14609       USA 

(716)    482  -  0300-Ptione 

(716)    288  -  5989  -  Fo« 


WHKRK   AND    WHY    PUBLIC    OWNERSHIP    HAS    FAILZD 

last  20  years,  at  a  cost  of  8,100,000  crowns  ($1,620,- 
000).  Still  another  special  feature  has  been  the  con- 
struction of  a  furnished  hotel,  containing  500  beds. 
The  city  is  planning  to  build  others. 


9.  Sweden  : 

Stockholm  (344.000  inhabitants)  owns  12,000 
apartments.  According  to  the  memorandum  ot  M. 
Gunichard.  one  of  the  municipal  directors  of  the 
city,  10,136  lodgings  are  to  be  consulered  as  hous- 
ing'2 1,000  persons,  almost  7  per  cent,  of  the  en- 
tire populati(Mi  of  the  city.  But  "these  apartments 
are  situated  in  old  houses,  about  to  be  demolished,  and 
the  citv  is  trying  to  sell  the  land." 

The' government  has  also  built  houses  for  the  bene- 
fit of  government  laborers  and  employees,  especially 
for  those  connected  with  the  railroad  and  telegraph 
services.  In  the  city  of  Stockholm  443  apartments 
are  reckoned  to  1,700  people. 


No.  WAY : 

Christiania  (227,600  inhabitants)  has  built  and 
rents  two  buildings,  containing  152  rooms. 

10.  After  their  review  (summarized  above)  of  mu- 
nicipal housing  in  general,  U.  Rousselle  and  his  col- 
laborators on  the  Municipal  Council  say,  with  em- 
phasis: 

"The  conclusion  of  this  rapid  review  of  the  work  ac- 
complished al)road  in  tlic  matter  of  housing  the  working 
classes  is  that  in  all  tlie  great  cities  the  officials  in  power 
have    approached    tlie    problem   squarely   and    have    at- 

168 


HOUSING    OF    THE    WORKING    CLASSES 

tempted  to   solve   it  by   the  most   direct   and   energetic 
means." 


Wherefore,  there  is  bitter  indignation  against 
"France,  which,  alone  among  the  great  modern  na- 
tions, obstinately  refuses  to  municii)alities  the  right 
of  direct  interference,  despite  the  failure  of  private 
initiative  and  in  the  light  of  universal  experience." 

It  is  curious  to  note  the  different  interpretations  to 
which  a  single  fact  is  susceptible.  These  municipal 
councillors  speak  of  the  failure  of  private  industry 
and  universal  experience.  But.  without  private  initia- 
tive, where  would  ninety-nine  one  hundredths  of  the 
population  of  London  be  living?  The  irrefutable 
facts  already  enumerated  show  that,  in  most  of  the 
cities  which  construct  and  rent  apartments,  the  privi- 
leged classes  who  occupy  them  form  but  an  infinitesi- 
mal portion  of  the  population.  If  individual  owners 
had  not  housed  for  a  long  time,  and  were  not  still 
housing,  less  favored  mortals,  the  great  cities  would 
not  exist  at  all.  And  still  another  fact  that  should 
be  observed  in  this  connection  is  that,  in  a  certain 
number  of  these  cases,  municipal  lodgings  actually 
constitute  supplemental  wages  for  employees  and  la- 
borers. 

From  no  possible  point  of  view  is  the  desire  to 
house  so  many  pjople  justified,  and,  moreover,  it 
threatens  both  political  and  social  dangers  in  the  fu- 
ture. For  example,  the  Hungarian  g<tvernment  estab- 
lishes settlements  of  small  homes  near  Budapest. 
Then  the  municipality  of  Budapest,  in  order  to  meet 
this  competition,  builds  houses  in  its  turn.     I  gaze 

169 


w 


WHERE    AM)    WHY    I'UBl.IC    OWNERSHIP    HAS    FAILED 

with  awe  on  those  states  and  cities  whicli,  while  con- 
frnnted  witli  the  necessity  of  husbanding  their  re- 
sources, have  the  courage  to  launch  out  into  such 
extravagances. 

According  to  the  advocates  of  municipalization,  all 
great  cities  should  construct  and  manage  workmen's 
houses.  l!ut  when  they  cite  facts  in  support  of  their 
contenti(jn,  their  fad'^  prove  precisely  the  opposite 
from  what  they  intended  them  to  prove.  The  majority 
of  the  great  cities  of  the  world  neither  construct  nor 
administer    houses    for    the    benefit    of    the    working 

people. 

Nor  have  such  cities  as  have  undertaken  this  kind 
of  work  displayed  the  courage  of  their  convictions, 
as  the  oft-(|uoted  example  of  the  London  County 
Council  proves.  In  cities  containing  hundreds  of 
thousands  of  inhabitants  lodgings  are  built  for  a  few 
hundred  people.  \'et  we  French  are  airily  urged: 
Imitate  them !  I  f  we  should  imitate  them  in  the  same 
degree  our  undertakings  would  certainly  not  amount 
to  much. 

However,  the  following  circumstance  proves  that 
the  efforts  of  the  jjromoters  of  municipal  lodgings 
are  bearing  some  fruit.  The  prefect  of  the  Seine  is 
demanding  the  creation  of  a  public  bureau  of  cheap 
lodgings,  to  which  the  city  of  Paris  shall  hand  over 
the  millions  set  aside  according  to  the  law  of  December 
12.  19 1 2,  for  that  purpose.  The  plan  provides  that 
the  bureau  shall  attend  to  the  payment  of  interest,  and 
the  reimbursement — after  75  years — of  the  capital 
thus  invested  by  the  city. 

But  at  what  rate  of  interest  can  the  city  of  Paris 

T70 


HOUSING    or    T1!K    WORKING    CLASSES 


borrow  now  (June,  1913)?  The  bonds  issued  at  3 
per  cent,  on  May  21,  19 12,  and  rated  at  285  francs,  are 
now  230  francs;  moreover,  the  housing  bureau  mr.st 
be  resi>onsibIe  for  capital  and  all  generid  expenses 
{)i  administration,  rental  and  up-keep  at  a  gross 
rate  of  2  per  cent.,  as  well  as  the  expenses  of 
control  by  the  city  of  Paris  at  a  gross  rate  of  0.15 
per  cent.  It  must  set  aside  0.50  per  cent,  for  a  reserve 
fund  to  cover  the  more  costly  repairs  and  unexpected 
expenses.  We  have  thus  a  rate  of  over  5  65  per  cent, 
lender  such  a  system  the  city  is  supplying  capital  to 
an  association  which  pays  interest,  builds,  maintains, 
and  rents,  it  is  true,  but  which,  at  the  same  time,  is 
neither  more  nor  less  than  a  monopoly.  sui)pressing  all 
competition,  since  it  frightens  private  cajjital  away 
from  just  such  investments. 

Conclusions. 

T.  The  laws  concerning  unsanitary  buildings  are  a 
new  violation  of  the  right  of  property. 

2.  The  establishment  of  sanitary  lists  is  designed 
to  keep  diseased  inmates  out  of  these  buildings.  But, 
in  order  to  circumvent  such  regulations,  proprietors 
will  contrive  to  make  all  prospective  tenants  pass  be- 
fore a  special  examining  health  board. 

3.  Sanitary  statistics  of  apartments  belonging  to 
municipalities  are  of  no  value,  because  the  towns  may 
choose  their  tenants. 

4.  We  see  the  London  Countv  Council  dispossess- 
ing 45.000  people  and  lodging  51.000.  These  latter 
are  seldom  or  never  the  same  people,  and,  therefore, 


HI 


WHERE    AND   WHY    PUBLIC   OWNERSHTP    HAS    FAILED 

between  the  destruction  and  construction  of  houses, 
the  unhappy  tenants  have  found  themselves  housed 
under  no  l)etter  conditions  than  before. 

5.  Those  cities  which  buy  real  estate  increase  the 
price  of  that  which  remains;  consequently  they  are 
helping  to  achieve  such  an  end.  In  constructing 
houses  at  all  they  are  withdrawing^  this  branch  of 
industry  beyond  the  reach  of  private  enterprise,  and, 
while  they  are  driving  individuals  out  of  business  by 
their  competition,  they  are  showing  themselves  inca- 
pable of  providing  for  the  needs  that  they  are  pre- 
tending to  care  for.  In  reality  they  are  working  in  the 
interest  of  higher  rents. 

6.  Then  such  cities  are  practically  subsidizmg  asso- 
ciations more  or  less  financial  and  philanthropic. 
These  are  fre(|uently  granted  special  privileges,  as  in 
France  under  the  law  of  1894.  reinforced  by  that  of 
1906.  Leon  Bourgeois  himself  described  the  results 
of  such  laws  as  "sporadic."  The  departmental  Com- 
mittee on  Patronage  of  Cheap  Houses  declares  that: 
"The  number  of  philanthropic  associations  is  unimpor- 
tant, and  they  are  not  modifying  hygienic  conditions 
in  the  housing  of  the  workmen  of  Paris." 

7.  The  law  of  1906  has  had  at  least  one  result: 
While  philanthropic  associations  were  showing  ^heir  in- 
efficiencv  individuals  and  contractors  have  hesitated  to 
invest  capital  in  the  construction  of  small  houses,  fear- 
ing lO  see  their  property  decrease  in  value  by  reason 
of  the  competition  of  privileged  associations  or  of  the 

city. 

8.  Statistics  prove  the    conclusions    aborve    drawn. 


HOUSING  OF  tup:  wokking  classes 

The  excess   of   huildings   constructed    in    Paris   over 
buildings  demolished  has  been : 


From  iQOi  to   1005,  43,475-5=8,695  per  year 
1906101010,3,5,845-^-5=6,769     •' 

Or  a  difference  between  the  two  periods  of  at  least 
22  per  cent. 

The  following  table  applies  to  tenements  of  500 
francs  per  year  and  under.  These  buildings  are  not 
taxed. 

Number  of  Number  o( 

Bu-.ldings  Builrlmgs  Exceu 

Constructed  Demolished 

From  1901-1905 37-159  12.243  24,916 

I906-I9IO 28,792  11,605  17,187 

Or  at  least  3 1  per  cent. 

As  a  matter  of  fact  the  housing  crisis  in  Paris  has 
been  provoked  by  legislative  and  municipal  inter- 
vention. 

9.  On  the  nth  day  of  July  (1912)  the  Chamber 
of  Deputies  passed  a  resolution  modifying  the  law  of 
1906  concerning  cheap  lodgings.  In  this  law  there  is 
no  mention  of  construction  and  direct  public  manage- 
ment by  municipalities.  Nevertheless,  the  Journal 
Oificicl,  of  July  30,  1912.  duly  proclaimed  the  law  as 
authorizing  the  city  of  Paris  to  borrow  200,000,000 
francs  ($38,000,000),  in  order  to  facilitate  "the  con- 
struction of  cheap  houses,  or  to  acquire  and  make  sani- 
tary buildings  already  existing."  The  law  as  modi- 
fied was  placed  on  the  statute  books  December  i,  19 12. 

In  part  compensation  for  this  enormous  outlay  the 
prefect  of  the   Seine   proposed   to   levy   taxes  to  the 

171 


I 

:ii| 


WHERE   AND   WHY    PUBLIC   OWNERSIIir    HAS    FAILED 

amount  nf  11.000,000  francs  ($2,200,000)  upon  ten- 
ants, (nvners,  and  billboards.  He  has  been  compelled 
to  abandon  the  scheme,  but  meanwhile  necessary  work 
on  the  city  streets  has  been  at  p  standstill* 

'Since  the  foreRoing  statement  wa<  mak',  the  project  has 
again  been  advanced  and  has  been  incorporated  in  the  budget 
of  1914. 


174 


CHAPTER  XV 

GOVERNMENT   CONTROL  OF  FOOD   SUPPLIES 

Public  Control  of  the  Sale  of  Fish,  Potatoes  and  Apples  in 
Swiss  Towns. — Eighteen  Communes. — Losses. — Nega- 
tive Results. — Competition  with  Private  Business. — 
Municipal  Slaughter  House  at  Denain,  France. — F'.x- 
periment  at  Montpellier.— Three  German  Slaughter 
Houses.— F'our  Slaughter  Houses  at  Vienna.— The  Mu- 
nicipal Oven  at  Udine. — The  Verona  Fish  Market. 

To  a  questionnaire  sent  out  to  Swiss  towns  bv 
Edgar  Milhaud  concerning  markets  operated  by 
them  ^  74  towns  responded ;  ;^;^  returned  purely  nega- 
tive answers;  41  have  made  some  headway  against 
the  high  cost  of  Hving;  Glarus  has  leased  a  fish  mar- 
ket to  a  merchant  who  has  been  authorized  to  raise 
his  price  from  ic  to  20  centimes  (2  cents  to  4  cents) 
a  pound  above  cost.  Oerlikon  had  given  to  certain 
families  the  right  to  reductions  of  from  10  to  20  per 
cent,  from  all  retail  dealers,  at  the  expense  of  the 
commune.  In  igo8  Romanshorn  opened  a  public  fish 
market:  "No  gains  and  few  losses."  Saint-Imier, 
1  lerisau,  Rorschach,  Schafifhausen  have  renounced 
similar  attempts.     Thun  has  leased  a  fish  market. 

At  Saint  Gall  the  sale  of  fish  yields  several  hun- 
dreds of   francs  profit  to  the  city,  and  has  lowered 

'  Les  Annales  de  In  Regie  Directe,  Feb.-April,   1912, 

^75 


wm;i<r  and  why  immuic  owni'usiih'  has  i mii... 


the  price  of  lisli  in  the  prnate  market.  The  market 
is  patn.ni/ed.  hnucver.  ^'iilv  by  weahhy  tamihes  (<v 
those  in  easy  eirunii>taiKes. 

Zurieh.  three  years  a,uo.  entrnsied  the  sale  of  sea 
fish  to  a  eoopcrative  society,  tlie  Zurich  Lchcnsmittel- 
verein;  the  lish  were  sold  at  C(.st.  plus  a  percentage  to 
cover  expenses.  The  administrative  council  of  the 
society  declared  that  '"the  attempts  made  to  accustom 
the  Swiss  pcjpulation  to  the  use  of  fish  food  must  he 
regarded  as  having  failed."  Zurieh  then  organized 
cooking  classes.  The  results  of  this  latter  experiment 
are  not  yet  known. 

Zug  has  established  a  municipal  slaughter  house. 
Freiburg  bought  and  sold,  in  the  autumn  of  iqio  and 
the  spring  of  iQii.  193,000  kilos  ( 474.'')00  lbs.)  of 
jvjtatoes,  at  a  loss  of  2,833  francs  ($53l->).  Lucerne, 
in  1911,  sold  13  carloads  of  potatoes.  4  carloads  of 
apples,  and  j  carloads  of  carrots,  for  cash.  The 
shipping  costs  were  luet  by  the  town.  In  addition 
43,750  kilos  (96,250  lbs.)  of  coke  were  sold  by  the 
city.  The  undertaking  ultimately  resulted  in  a  loss  of 
2,842  francs.  In  any  event,  the  authorities  of  Lucerne 
can  hardly  be  accused  of  suijplying  over-substantial 
nourishment  to  their  fellow-citizens! 

The  town  of  Saint  Gall  caused  vegetables  to  be 
sold  by  a  cooperative  society  at  cost  price  f.o.b.  Saint 
Gall  at  the  receixing  point  (the  railroad  station  ).  The 
city  paid  the  difference,  which  amounted  to  400  francs 
a  month.  The  sale  was  limited  to  "that  part  of  the 
public  without  income."  The  total  sales  amounted  to 
only   1,700  francs,  the  expenses  to  6.1 31    francs,  and 


(;()\i:kxmkn  1   ((intkoi    ok   kooi)  si'iti.iks 


tlic  attempt   lasted  <.iily    (min  tlir  first   of    Xovciiihcr, 

191 1,  til  l*"cl)ruary  _'<;,   i()ij. 

During   the   winter   iiKMitlis    rc)io-ioir    and    loir- 

1912,  l!ern  undcrtDok  to  |nirelia>e  potatoes  at  wiiole 
sale  and   to  sell   them   at   retail.      in   the   latter  year, 
it  added  the  sale  of  white  eabbages.     As  a  matter  of 
course  the  experiment  resulted  in  losses. 

Lausanne,  during  several  days  in  19 10,  sold  po- 
tatoes with  a  prcjfit  of  2,^0  francs  15  centimes, 
and  distributed  a  balance  of  1.340  kilos  {2.948  lbs.) 
gratis. 

In  1911-1912  Zurich  sold  550  kilos  (1,210  lbs.) 
of  potatoes  at  a  loss  of  901  francs  25  centimes  which 
was  reduced  to  569  francs,  following  a  reduction  in 
the  freight  costs  of  7,^^2  francs  25  centimes  made  by 
the  Federal  railways.  "A  reduction  of  the  freight 
rates  has  been  granted  for  the  transportation  of  food 
supplies  from  October  i,  191 1,  to  May  31,  1912,  if  the 
supplies  are  to  be  utilized  for  the  public  good." 

Anybody  who  ships  potatoes  ships  them  for  the 
public  benefit  since  they  are  destined  to  provide  food 
for  those  who  buy  them.  This  reduction,  therefore, 
simply  gave  a  subsidy  to  municipalities  as  against  in- 
dividual merchants.  The  figures  that  I  have  just  re- 
produced prove  that,  if  the  Swiss,  in  order  to  live, 
had  been  forced  to  rely  upon  the  municipality  ff)r 
their  food  in  1910-1911.  they  would  all  be  dead  of 
starvation. 

As  a  matter  of  fact,  18  communes  have  made  at- 
tempts at  public  regulation  of  food  supplies,  in  order 
to  combat  the  high  cost  of  living.  These  are:  Brugg 
(3,000   inhabitants)  ;     Weinfelden     (4,000)  ;     Baden 

ITT 


UIIIKI     AM)    \\  \[\    |M    |;|  I(     iiU  Ni;i<s||  I  !■     IIA^    1    \1I.I"I) 

((),()5()i:  <  irriulKii  (  t.joj  )  ;  l\i  i!ii,iii--lii  ini  ( '>.i  lOo  i  ; 
riiiiii  (  ''.'!_■;()  I  ;  I  k'ri-^aii  (  I  ,-;.S3_^  )  ;  I  A'  I.ckK'  M  _^  i<)7  i  ; 
Rorstliacli  (i_V4Si):  SchalThansrii  (17,1.48):  I'rci- 
linrt,''  (  _'( ).  .^(K  )  )  ;  |.;i.  (  liai;  \-(lc-|i  iii(I>  (.V'-V)/)-  '-l'" 
ccrne  (,^8,4()7);  Saint  (iall  (,^3.<'()i));  liaslo  (i-'<^.- 
Ooo):  IUtii  (78.300);  l.au-^aIlIlL■  (  3i>,_^J7  )  ;  Zurich 
(  I  So. 000  ! . 

Milhauil  cuiicliulc^  liis  artklc  uilli  this  enthusiastic 
statt-'Uicnt : 

"As  a  resuh  nf  liii^c  puMir  scrviro  wc  lia\f  rcniarkdl 
tlif  follow  ini,^  00-t  iL(liutions :  rotatcx--,  I'roni  1  _•  J)lt 
cent,  to  -'4  pt-T  cent.;  I'ml.  13  per  cetit.  to  30  per  cent.; 
fish,  30  per  cent,  to  31)  per  ceiU." 


Or  in  other  words  free  cnnii)etition  is  making  a  lo^- 
inj/  flight  aj;aip>t  pulilic  (tperation,  and  I'.dj^ard  Milhaud 


eons 


iders  this  a  must  dcsirahle  state  of  affairs. 


If  the  custom  of  ])rovidin,<^  s;ovcrnnient  food  should 


ever   hecouie 


lenerah    u    would   he   neces-^arv    tor   an 


individual  to  have  ,ti;reat  courage  in  order  to  engage 
in  anv  similar  undertaking  in  view  of  the  i)rospect  of 


jenu 


undersold  hy  the  municipality.      i'he  l 


own  can 


lose  with   impunit\- ;  the  taxpayers  will   make  u\)  the 
loss.     ()n  the  other  hand,  loss  to  a  merchant  means 


his  whole  Imancial  standmg  ui  the  community  and 
that  of  those  who  may  have  ])laced  confidence  in  him, 
all  of  whom  have  a  right  not  to  antici])ate  such  dis- 
turbing factors  as  result  from  the  intervention  of 
municipalities  turneil  merchants  vi  potatoes,  apples, 
cabbages,  carrots,  and   lish. 

The    towns    concerned     u.iuld    answer    that    their 
action  was  only  one  form  of  philanthropy.     As  a  mat- 

178 


COVFKNMK.NI     idXiKOI.    (M'    FOOD    SUPPLIES 

tor  «.t  tact.  >fveral  nt'  (lum  di.i  Imiit  their  sales  t-. 
the  |)cH,r  (  )thers.  hi. never,  (h<l  iMt  take  this  precau- 
tion, and,  III  the  iiKijurity  ni  cases,  they  (hd  ii..t  seek 
any  justilieatioti    for  the  niea>ures  thev  iuok. 

I  (III  not  helieve  that  the  reMihs  of  tliis  invei'tii^atioii 
woulil  eneouraije  ver\  many  tnuns  t,,  t"i  Ilow  the  e.\- 
anqde  ot  tlie  iS  Swi.s>  toninnines.  The\-  are  such  tliat 
It  Is  not  even  necessary  to  fiinii-h  liirther  arf,nnnents 
for  an  anu'n(hiient  to  the  law  of  iS,S4  prohihitint,^ 
nuinicipahties   from  .i^'oiiijr  jntn  husiness. 

In  i<)ii  there  were  several  attempts  in  l->ance  to 
re.s;ulate  the  fond  supj.'v.  The  mayor  of  Denain,  M. 
Selle.  opened  a  municipal  slaughter  house.  Cattle 
decked  with  rihhons  were  conducted  there  solemnly 
to  the  tune  of  the  "Internationale,"  .\t  the  end  of  one 
week  the  iindertakin<,f  developed  the  following  fig- 
ures ( in  francs)  : 

Expenses 

Purchase    of   animak 17,45^52 

Managemeiit  ami   iu.spection  of  animals 1,011.36 

Tf'tal    18.464.68 

Receipts 

Sale  of  meat iS,~oo.j5 

Sale   of    skins 1,365,51 

Misccllancnus    receipts    171-55 

^''""tal    17.237-31 

Deficit  III  7  days 1,227,37 


The  mayor  called  a  hah.  The  indignant  populace, 
whom  he  had  promi.sed  to  feed  helow  cost,  hroke  into 
his  house,   from  which  he  managed  to  escape  under 


'/l* 


WHKRK    ANU    VVHV    IMBLIC   OWNERSHIP    HAS    FAILED 

the  protection  of  the  pohce.     Thereafter  neither  the 

niayorahv  nor  the  nuinicipal  council  knew  him  more. 

\t  Montpelher  an  attempt  at  a  municipal  slaughter 

house  was  made,  which  resulted  in  a  loss  of  6,000 

francs.  ... 

Edgard  Milhaud.  .v^o  sees  all  attempts  at  public 
.uvncrship  throu-h  rose-colored  glasses,^  has  declared 
that  at  EberwaUl.  Thionville.  and  Freiburg-im-Breis- 
crau  the  attempts  at  municipalizing  a  slaughter  house 
were  successful.  Xccording  to  the  director  of  the 
abattoir  of  Freiburg,  ^•-.  Metz.  the  experiment  which 
took  place  in  1893.  was  only  tomp.-rary.  and  a  burden 
while  it  lasted.  The  enormous  waste,  which  may  and 
does  occur  in  sucti  enterprises,  renders  management 

verv  difficult. 

At  Thionville  experiments  were  made  with  pork  in 
order  to  force  the  butchers  to  lower  their  prices.  "The 
meager  profits  realized  were  divided  between  two  old 
butchers  who  had  been  entrusted  with  the  purchase, 
slaughter  and  sale  of  the  meat."     In  1905.  at  Vienna, 

four  municipal  abattoirs  were  established,  which  dis- 
appeared after  a  short  period.^ 

Ml  these  undertakings  are  direct  attacks  on  com- 
mercial  freedom,     in  Italy  '  such   attacks  are  made 

without  scruple.     I'dine  opened  a  municipal  oven  in 

order  to  ruin  the  existing  bakeries.     Verona  sells  f^sh 

to  the  injury  of  other  fish  merchants. 

'  Amialcs  dc  la  Regie  Directe.   iQC*.     .       ^     ,     „       ,.^   . 

'The  Revue  Bkue:     La  MunicxpahsaHon  de  'a  Bouche^*e   hy 
Henri  Martel.  director  of  the  Veterinary  Service  of  tht  Pretec 
ture  of  Police. 

•  See  Book  4,  The  State,  a  Dishonest  Man. 

180 


CHAPTER  XVI 

VICTIMS   OF   GOVERNMENT   OWNERSHIP 

The  Mayor  of  Elbeuf,  M.  Mouchel,  and  Gas  Service. — The 
Mayor  of  Milwaukee. 

A  high  school  professor  of  Elbeuf,  M.  Mouchel, 
afterward  mayor  of  that  city  for  17  years,  and  finally 
deputy,  was  attacked  by  the  municipalization  mania. 
He  municipalized  water,  electricity,  gas,  the  col- 
lection and  disposal  of  garbage,  and  the  burial  of 
the  dead.  February  28,  191 1,  there  appeared  in  the 
Dcpedie  de  Rouen  a  highly  eulogistic  article  extolling 
his  work.  On  October  15  of  the  same  year  the  mayor 
was  obliged  to  confess  that  his  attempts  at  municipali- 
zation were  causing  a  deficit  of  180,000  francs  ($34,- 
200)  in  a  budget  of  800,000  francs  ($152,000).  A 
sum  of  250,000  francs  ($47,500)  would  be  necessary 
to  cover  the  losses. 

After  confessing  his  delusions  and  deceptions  be- 
fore a  meeting  of  the  municipal  council  M.  Mouchel 
ccjmmitted  suicide  in  the  cellar  of  the  town  hall. 

The  serenity  of  the  Socialist  journals  was  scarcely 
rippled  by  such  an  occurrence.  L'Hnmanitc  remarked  : 
"It  will  be  found  that  the  municipal  ojjcration  of  gas 
will  not  have  cost  a  S()u  more  nor  less  than  private 
operation."  Even  if  that  statement  were  true  it  would 
have  been  bad  business. 

181 


WHERE   AND   WHY    ."UBLIC   OWNERSHIP    HAS    FAILED 

But    the    partisans    of    government    and    municipal 
ownership    are    incorrigible.      "What    if    there    are 
losses."   they  say:   "the  citizens  have  been  gamers. 
Not  a<  taxpavers.  that  is  certain. 

As  for  the  Ihnted  States  the  disorder  and  waste 
of  its  municipal  admmistrations  are  notorious,  and 
development  of  public  operation  has  certainly  not  les- 
sened them.  .  1     •     1 

In  Milwaukee,  a  citv  inhabited  almost  exclusively 
by    Germans,    municipal    Socialism   has   been   a   very 
costlv  pnnn.sition.     Before  the  city  had  experimented 
with'a  single  municipal  undertaking  the  annual  normal 
increase  o^f  the  budget  was  $250,000.     Beginning  with 
1 009  it  has  increased  $1  .ooo.noo  in  two  years.     At  the 
April  elections.  I9l-^  the  Socialist  ticket  was  defeated 
bv  a  majority  of  i;vOOO  and  Mayur  Seidel  prosecuted. 
'  A  new  Bureau  of  EfJicicncy  ami  Economy,  costing 
$20,000  a  year,  has  been  <,rganized.  but  it  has  thus  far 
failed  to  make  any  report.' 

'Journal  of  Commerce,  New  York.  December  22.   iQ"- 


ie2 


CHAPTER  XVII 

CHARGES.    DF.RTS    AND    CREDIT 

The  Profits  of  Rritish  Financial  Enterprises  for  the  Period 
1893-1898.—  1S98-IQ02.— Report  fo:  1007:  1903-1906.— 
An  Annual  Profit  of  6s  ,vi  ($1.50)  per  100  Pounds.— 
Financial  Situation  on  March  7,1.  1911.  "f  2,500  Local 
Government?.— Sut)Stitutin.t;  Monopolies  for  Taxation. 
—Relation  Between  Local  Taxation  and  Appropria- 
tions, los  -d  ($2.54)  per  100  Pounds.— Increase  of 
Local  Taxes.— Increase  of  Loans.— Decline  of  Credit. — 
Complaint  of  a  Citizen  of  Birniinsrham.— ''rofit  on  Un- 
dertakings and  the  Cost  of  Loans.— l-onclusions  of 
Major  Darwin.— Credit  of  C.erman  Local  Covernments. 

Let  us  now  take  tip  the  question  of  charges,  debts, 
and  credit,  in  relation  to  British  local  enterprises. 

i'he  first  parliamentary  report  on  municipal  under- 
takings, which  appears  under  the  title  of  Municipal 
Corporations'  RcprodiictiT'c  Undertakings,  dates  from 
1899.  It  includes  accounts  of  265  towns  of  England 
and  Wales  for  a  period  of  five  years,  ending  March, 
1898.  The  financial  results  indicated  arc  shown  in 
the  following  table: 

Pounds  Sterling 

Capital    invested 88,152,000 

Annual  net  profit:    depreciation  deducted.  . .         370,000 

The  second  document  dates  from  1903      It  is  more 
comprehensive.     The  Municipal   Year  Book  of   1912 

183 


!ili! 


WHERE    AND    WHY    PL'BI  IC    0\V  N'ERsl  1 1  p    HAS    ["AILED 

reproduces  it  in  its  entirety,  it  gives  the  results  oi 
the  undertakings  o\  jq()  municipalities  out  of  ,^7 — 
not  including  London — for  a  period  of  four  years, 
or  from  i8qS  to   i<)02. 

pounds  Stirling 

Capital    invested    121.172.000 

Net  annual  profit;    depreciation  deducted....  .^78,000 

-\n  apparent  profit  of  .31-.'  per  cent,  is  thus  indi- 
cated. 

In  1907  the  Local  '^lovernnient  Board  published  a 
supplementar\  stalenient.  showing  the  results  obtained 
by  192  niunici])alities  out  of  324  in  England  and  Wales 
during  the  year  1904-1905. 

Pounds  Sterling 

Profit?  in   aid  of  taxes 8<>8,742 

Deficits    covered   by    taxes 242,472 


Municipal  Trading  Returns  f  Xo.  171,  1909)  gives 
statistics  only  regarding  the  work  of  the  L()ndon 
County  Council,  the  City  Corporation,  the  London 
boroughs,  and  43  municipalities  in  England  and  Scot- 
land for  the  four  years  from  1902-1906. 

Mr.  J.  H.  SclKJoling.  the  celebrated  statistician,  has 
demonstrated  that  all  the  municipal  enterprises  taken 
together  show,  for  the  period  1S98-1902.  an  annual 
profit  of  ()s  31/  ($1.50)  per  100  pt)un(ls  sterling  of 
capital  invested.  He  adds,  however,  that,  if  the  de- 
preciation of  roadbeds,  eciuipment,  etc..  of  the  various 
undertakings  was  taken  care  of  as  it  would  be  in  pri- 
vate business  normally  managed,  the  annual  loss  would 
be  5.500,000  pounds  sterling  ($26,785,000),  or.  in 
other  words,  £4  los  yd   {%22)  on  every  100  pounds. 

184 


CHARGES,    DEBTS    AND    CREDIT 

Among  the  sources  of  profits  are  reckoned  the  sums 
collected  from  private  businesses.  These  sums  are 
very  large  in  the  case  of  some  municipalities,  but  they 
cannot  legitimately  be  called  profits  from  municipal 
enterprises.' 

The  Local  Government  Board  has  puhli,  i.^d  a  state- 
ment of  the  receipts,  expenses,  and  local  loans  in 
England  and  Wales  for  the  year  1910-1911.  The 
number  of  local  authorities  included  in  this  work  is 
2,500.  representing  about  one-tenth  of  the  local  gov- 
ernments mentioned  in  the  local  taxation  returns  for 
the  same  districts.  The  financial  situation,  on  March 
31,  191 1,  of  these  2.500  local  governments  was: 

Pounds  Sterling 

Receipts  from  nil  sources  except  loans.  ..  .  122,1)53,000 

Expenses,  txcept  capital  expenses 122.082,000 

Receipts    from    loans 16.137,000 

Capital    expenses    15,300,000 

Total   debt  at  the  end  of  the  year 410.695.000 

Sum   to   the   credit    of   sinking   funds   and 

the    like    21,198,500 

The  debt  of  these  2.500  local  governments  reached, 
then,  the  enormous  figure  of  £410,695.000  ($2,000.- 
094.000).  The  expenses  are  more  than  £137.382.000 
($668,850,000).  Of  the  £122.953.000  ($598,780,000) 
of  receipts,  local  taxation  accounts  for  £64.004,000 
($311,699.5001  and  grants  frotn  the  exchequer  (in- 
cluding the  local  share  of  license  fees)  for  £21.073,000 

'Fortnightly  Keviezv.  August,  IQ06;  Lord  Avebury,  On  Mu- 
nicipal and  National  Trading,  page  68. 

185 


-m 


WIIKRl.    AM)    WHY    I'lBllC    OW  N  EKSII II'     HAS    lAIl.ED 

($ioj.()25,5io).  giving  a  total  oi  £85,077.000  ($414.- 
325,000). 

The  apologists  for  municipal  enterprises  give  the 
impression  that  such  undertakings  may  be  substituted 
for  taxes,  with  no  apparent  perception  of  the  fact 
tliat,  if  municipal  enterprises  were  W  replace  taxation, 
by  reason  (jf  their  innately  fiscal  character  they  would 
come  to  weigh  heavily  on  the  consumers.  The  concep- 
tion of  substituting  municipal  enterprises  for  a  treas- 
ury is.  therefore.  onl\   a  delusion. 

Local  government  undertakings  ha\-e,  in  some  in- 
stances, yielded  profits  which  have  relieved  local  taxa- 
tion, But  in  others  the\-  have  created  deficits  which 
.ire  met  only  with  the  lulp  of  taxes. 

In  1910-191  I  the  total  amount  contributed  in  aid  of 
taxes  on  gas.  elecliicity.  ports,  docks,  jetties,  canals, 
quavs,  tramwa\s,  light  railways,  and  waterworks  un- 
dertakings was  £i.,^JO.ooo  (.$6,428,400),  of  which 
£1.203.000  ($5,858,600)  came  from  town  councils. 

The  total  amount  of  tax  funds  paid  out  to  provide 
for  deficits  on  the  same  undertakings  was  £971,000 
($4,728,800),  of  which  £631,000  {$3,073,000)  was 
provided  by  town  councils. 

Pounds  Sterling 

Surplus    1,320.000 

Deficit    Q7i,ooo 


349.000 


Thus,  the  reduction  of  local  taxation  effected  by 
profits  from  local  enter])rises  amounted  to  £349,000 
I  $1,700,000).  or,  as  against  the  £64.000.000  ($311.- 
080,000)   of  local  taxes  and  the  £23,000,000  ($112,- 


CIIAKGIiS.    DEUrS    AND    CRKDI T 


000,000)  furnishtd  liy  tlic  (-'.\chc'(|iicT  to  0.41  per  cent 


or  less  than  one-halt  oi"   i  ])er  cent. 


a  sufficient  answer 


to  th 


These  figures  are 
f 


ose  partisans  01  government 


ownership  who  are  continually  reiterating  that  ex- 
jjense  may  he  Micurred  with  impunity  l)ecau>e  gov- 
ernment monopolies  will  jiav  for  them.  .\ntl.  more- 
over, receiitt:  I'rom  ports,  jetties,  cpiays,  and  canal^•, 
which  are  not  indusi'-iHl  operations  j)ropcrly  so- 
called,  are  included  in  these  tigures. 

Morco\er  to  the  loans  previously  noted  as  granted 
to  local  g()vernment>,  fj^.J  r  0.000  ($113,033,000) 
sliould  he  added  for  the  Port  of  London;  £23.7_'o.ooo 
($125,256,400)  for  the  Mersey  Docks  and  Ilarhor 
Board;  £49,529,000  ($241,236,000)  for  the  Metro- 
politan Water  Board:  more  than  £14.692,000  ($71,- 
5:;o.ooo)  for  ports,  docks,  cpiays.  etc.,  or  a  total  of 
£129,288,000  ($625,795,000).  The  taxahle  value  of 
all  this  property  was  £217.180,000  ($1,057,667,000), 
from  which  must  he  deducted,  however,  £1,737,000 
($8,459,000)  representing  government  property, 
which,  in  lieu  of  ta.xes,  pays  an  ec|uivalent  sum  under 
the  name  of  "contributions.'* 

J'he  following  figures  show  the  total  local  tax  dur- 
ing the  three  years  1908- 19 11 : 

Year  a  ^"  ^;;?"v'°f  Per  Inhabitant 

"^"  Asscssabli   Value 

s         d  £     s    d 

igio-iQii  6   4         I  IS  0 

1909-1910  6   2',^        I  i.^  I 

1908-1909  6    i;4        '  '4  ^ 

The  pound  sterling  is  20  shillings.  The  tax  of 
1010-1911  represents  then  more  than  30  per  cent,  of 
\\vj  assessed  value  of  the  taxahle  property  just  listed. 


VVIIKRi:    AND    WHY    PUBLIC    OWNKRSIIIP    HAS    lAILED    • 

IMuniciiial  enterprises,  far  from  having  relieved  the 
taxpavers.  liavc  not  jirevented  local  taxes  from  soar- 
ing higher  in  kjio-kjii  than  they  had  ever  done  he- 
forc. 

Municipal  enterprises  make  loan-  necessary,  and 
the  increase  of  loans  involves  loss  of  credit. 

Since  Dec.  igoi  Quo' ai ion  for  July  Jo. 

The  Hit'htst  "'■',, 

(Juotations  Lowest  Hignest 

Metropolitan  Cons.  Stock  3'/:%     ioq  9QK2  'oo' ^ 

Metropolitan  Cons,  ^tdck  ^'^f- •      102  87  88 

Metropolitan  Cons.  -tcK-k  J' 1%       ni'A  68'/j  69^ 

Belfast    ,^7r     (  UJS.V^  1 94'A  75 

Birmingiiani   2 '4% 88'/i  75  77 

Brighton  3^0    (ig33-5.^) 9-^  8'  °^ 

Glasgow   3' 1''^'^    "^'^  "^^ 

Glasgow    gas    annuities    ^gs^  236'/^ 

Undflersfield  3^^%  0".14)   ■•■  106'^  95  96 

Hull    3'^'"     "°''^  94  90 

Leeds    't)3  I34  '36 

Leicester    3'^%     '*.  93  95 

Liverpool   ^'/,7c    12: '4  98'/2  99'/2 

Manchester   4%     '32  m  '13 

Vewcastle-on-'l'yne  3/2%    •  •  •  •  107M  94  9^ 

Plymouth   3%    07  84  » 

Nottingham  3%    'oo  36  » 

Portsmouth   3/2%    i05'/2  96  ^ 

Readmg   3^2%    ''^/^  94  96 

Sheffield   2^^%    82  69  71 

Southampton    3/2%    >ot'/4  92  9* 

Swansea  2^2%    ^H  93  95 

The  Birmingham  Daily  Mail,  of  May  24.  191 1,  pub- 
lished the  letter  of  a  correspondent,  who  says: 

"The  town  made  last  year  a  profit  of  £132,174  ($643,- 
687),  from  which  must  be  deducted  a  loss  of  ^SZ'OQi 

188 


•  cu.\k(;es,  -jebts  and  (  redit 

($278,033).  riif  citi/.ins  of  r.iriuin^Miani  liave  loaned  to 
the  city  £iJ,50f),ooo  1  $()0,(S73,(X)0 ),  on  which  tliey  lose 
all  their  taxes  and  recei\c  in  tiirn  ahont  iito.cHU)  (  $jf)J.- 
20<">l,  or  less  than  0.45  i)er  cent.,  whereas  if  they  (the 
inunicijial  undertakings )  were  paying  5  per  cent,  tliey 
would  yield  £f)5o,oou  ($3.i(i5,50(» )." 

Hilaire  Fkdlnc.  during  a  debate  at  .Menional  Hall, 
in  London,  with  Rani-ny  McDonald,  the  president  ot 
the  Lahor  I'arty  in  Parliament,  said: 

"Municipal  enterprises  have  Ijeen  established  by  means 
of  loans  contracted  with  capitalists  to  whom  the  various 
local  governments  offered  returns  which  these  undertak- 
ings either  did  or  did  not  furnish.  The  rc^iilt  has  been 
that  municipal  undertakings  have  been  bringing  in  about 
1.8  per  cent.,  while  3.2  per  cent,  interest  was  being  paid 
out.  The  debt  has  been  increasing.  There  has  been 
more  and  more  need  of  capitalists  who  have  refused  to 
consent  to  new  loans  seeing  that  the  debts  were  growing 
in  an  alarming  manner."     {  Lahor  Leader.  May  12,  1911.) 

Major  Darwin,  in  his  objective  study  of  tnunicipal 
uidustries.  reaches  the  following  conclusion : 

"Municipalities  can  manage  markets,  public  baths, 
slaugliter  houses,  cemeteries,  and  waterworks.  Munici- 
palities may  own  tramways.  But  all  these  enterprises 
ought  to  be  operated  privately.  (}as,  electricity,  tram- 
ways, the  telephone,  ought  to  remain  in  the  hands  of 
private  individuals." 


He  further  suggests  that  municipalities  be  forbidden 
to  manufacture  electrical  apparatus;  to  own  houses;  to 

i8q 


VVIIKRI-:    AM)    WHY    PKBI.IC    OWNKKSllU'    MAS    lAILED 

engage  in  (.oiistruction  wilhcuit  contractors.  Mnnici- 
palitics  should  he  torl)i(l(lcn  to  attempt  to  make  money, 
and  tlieir  horrovvnig  power  ought  to  he  restricted.' 

In  the  L'nited  States  the  dcl)t  hmit  for  municipal- 
mes  is:  k;  per  cent,  ol  the  taxahle  value  in  New 
\'ork.  5  per  cent,  in  many  of  the  western  states,  and 
_'  per  cent,  in  (  ihers. 

This  year  (  191 3)  the  (lerman  cities  are  being  much 
hampered  for  lack  of  credit.  A  loan  sought  by  the 
cilv  of  C'arl-ruhe  has  had  to  he  indefinitely  postponed 
The  smaller  and  medium  sized  municipalities,  in  the 
absence  (jf  funds,  have  been  t)bliged  to  [)ostpone  neces- 
sary work. 

'  Constitutional  Amendments  to  be  added  to  the  Declaration 
of   Rights. 


190 


CHAPTER  XVIII 

FICTITIOUS    PROFITS 

Railway  Charges.— Local  Taxes  on  rrussian  and  English 
Railways.— The  Victorian  State  Coal  Mine  and  the 
(jQvernnient  Railways. — .\ew  Zealand. — Profits  of  the 
National    Printing    Office.- The    Insurance    Monopoly. 

Private  enterprises  are  subject  to  certain  charjjes 
from  which  state  undertakings  are  exempt.  These 
exemptions  create  an  illusion  of  profit.  Local  taxes 
paid  l)V  the  government  railroads  in  Prussia  amount 
to  £750.000  ($3,652,500),  while  similar  taxes,  paid 
by  the  railways  of  the  United  Kingdom,  having  nearly 
the  same  length  of  line,  reach  "5,000,000  ($24,350.- 
000).  If  both  were  taxed  at  the  same  rate  the  profit 
on  the  government  railroads  in  Prussia  would  be  pro- 
portionally reduced.* 

Further,  the  profits  of  one  state  undertaking  are 
freciuently  obiained  only  at  the  expense  of  another. 
For  example,  the  Victorian  state  coal  mine,  in  Aus- 
tralia, is  called  a  success;  but  the  director  of  railroads, 
.Mr.  I-itzpatrick,  complains  of  losing  45,000,000  francs 
($8,550,000)  through  being  forced  to  use  government 

coal.^ 

At  the  end  of  1912  it  was  announced  that  the  New 

'  Edwin  A.  Pratt,  Rail'uxiys  and  Nationalization,  page  3- 
'  For  New  Zealand  see  Book  2.  Chapter  VII. 

191 


Wm' 


wirrRK  ANM)  \vIf^'  pnni.ic  owNERSiiir  it  as  failed 


Sdiitli  Wales  i,'<)\iriimfnt  was  prrparcd  tn  !iatii)iialize 
till-  iriii)  industry,  l>ut  with  the  pmviso  that  the  l-'ederal 
},'()veriitneiit  iin>t  stand  ready  to  order  the  material  for 
the  new  railroads  from  its  mills.  "Peter  is  being 
rohhed  to  i)ay  Paul.  Hut  such  are  the  methods  of  pre- 
senting,' the  accounts  that  the  public  does  not  i)erceive 
this  fact."  says  Liberty  and  I'roijrcss,  Melbourne.  May 
K;  I  I . 


-'5 


The  Nat;  jnal  Printinj^  Office  of  France  undertakes 
to  do  outside  work  for  editors;  at  the  same  time  it  has 
a  monopoly  of  the  government  printing.  It  farms  out 
its  work  t(j  private  printers,  and  it  adds  a  charge  of  its 
own  to  the  original  cost  when  the  work  is  delivered  to 
the  departments,  which  have  no  choice  but  to  have 
their  printing  done  by  government  printers.  In  this 
connection  the  inspector  of  the  finances,  M.  Bizot.  has 
pointed  out  the  following  facts: 

"The  National  Printing  ( )fifice  furnishes  the  forms  for 
telegrams.  It  has  contracted  with  a  private  company  to 
manufacture  and  deliver  these  forms  to  the  aforesaid 
printing  office,  cut.  folded,  perforated,  gummed,  and 
turned  at  a  cost  of  67  centimes  per  i.ooo  forms  in  pads 
of  100,  and  50  centimes  ])er  1,000  forms  when  delivered 
as  loose  sheets.  Up  to  191 1  the  National  Printing  Office 
invoiced  these  supplies  to  the  postoffice  at  a  cost  of  2  fr. 
and  I  fr.  62.  respectively,  instead  of  67  and  50  centimes. 
In  1910  this  addition  of  more  than  200  per  cent,  repre- 
sented a  profit  to  the  National  Printing  Office  of  82,000 
francs." 

And  who  was  paying  this  profit  to  the  National 
Printing  Office?    \\'hy.  the  Postoffice  department,  or, 

192 


FICriTKH'S    I'ROFITS 

in  other  words,  the  gnverninciU.  l)y  suhmittin^'  t"  an 
overcharge  of  82.CXX)  francs. 

The  law  of  April  4,  191 -'.  has  onlcrcd  that  the  in- 
surance inoncjpoly  in  Italy  shall  be  exenii't  Ironi  postal 
charges,  and  that  its  profits  shall  not  he  subject  to 
the  income  tax. 

These  exemptions  will  be  accounted  on  the  credit 
side  of  the  insurance  monopoly.  They  ought  to  be 
deducted  from  the  government  resources. 


I 


'yj 


I 


CHAPTER  XIX 
FISCAL    MONOPOLIES 

1.  Tobacco  Monopoly  in  France.— Treasury  Profits.— Losses 

to  Agr-culture,  Industry  and  Commerce.— Use  of  Na- 
tional 7'S.  Maryland  Tobacco.- Opposition  of  the  Con- 
sumer.—The  .\'dvanta.a:e.— Delusion^  Rei?ardin^'  Regula- 
tion. 

2.  The   Match    Monopoly    in    l-'rance.— No    Amortization.— 

Bookkeepinj^:  .\rtifices. 

3.  Fiscal   Profits. 

I.  Tt  is  customary  to  speak  of  the  rcstilts  of  the 
tobacco  monopoly  in  France,  in  force  since  181 1,  as 
marvelous. 

The  income  appears  truly  enormous.  In  1815  it 
was  3_M -'3.000  francs;  in  1830,  46.782.000  francs;  in 
1850.  88.915,000  franc.;:  in  i860,  197.210,000  francs; 
in  1890.  305.*  18.000  francs;  in  1900,  338,872,000 
francs;  in   19 10.  AO?'?,.^^-^^  francs. 

Without  doubt  this  is  a  dazzling  result  from  the 
fiscal  point  of  view,  and  it  also  ])roves  that  the  num- 
ber of  Frenchmen  who  use  tobacco  has  increased  more 
rapidlv  than  *he  population. 

But  there  are  other  ways  for  a  government  to  make 
money  out  of  tobacco  than  by  monopolizing  the  sale 
of  it.  In  1908-1909  the  United  Kingdom  realized 
£1^.328.000  upon  tobacco,  that  is  10  say.  333,450.000 
francs,  or  onlv  74.000.000  francs  ($14,060,000)  less 
than  our  monopoly  has  yielded  us. 

194 


I 


1-MSCAL    MONOPOLIES 

We  see  what  this  nionopr.ly  has  contributed  to  the 
Treasury;  but  we  do  unt  sec  the  losses  occasioned  by  it 
to  French  agriculture  and  industry.  It  is  a  privilege 
to  be  allowed  to  cultivate  tol)acco.  I  have  heard  a 
deputy  say :  "I  will  guarantee  that  not  a  single  one 
of  my  political  adversaries  will  cultivate  one  acre  of 
tobacco."  Possibly  he  was  boasting;  but  that  a  deputy 
could  use  such  language  is  sufficient  to  prove  just  how 
far  official  authority  is  capable  of  being  abused. 

In  any  case  there  are  only  27  districts  permitted  to 
cultivate  tobacco,  and  these  districts  are  situated  in 
all  parts  of  b'rance,  from  the  North  to  Landes,  from 
Ile-et-Vilaine  to  the  Var.  Therefore,  climatic  rea- 
sons have  not  determined  these  concessions,  which, 
as  a  matter  of  fact,  are  wholly  dependent  upon  politics. 
The  number  of  hectares  authorized  was  17,955  (44,880 
acres)  in  1909,  and  18,005  hectares  (45,000  acres)  in 
19 10.  In  the  first  year  mentioned  15,037  hectares 
(37,593  acres)  out  of  a  j)ossible  17.955  hectares 
(44,880  acres),  and  in  the  second  year,  14.683  hec- 
tares (36.708  acres)  out  of  a  possible  18,005  hectares 
{45,000  acres)  were  cultivated.  The  number  of  li- 
censes was,  respectively,  48,395  and  47,283. 

The  quantity  of  tobacco  bought  was  23,134,000  kg. 

(50.894.800    lbs.)     in     1909.     averaging    23,122,000 

francs,  and.  in  1910,  21.034,000  kg.  (46,274,800  lbs.), 

averaging  22,085.000  francs. 

Fr.  C. 

Value  of  domestic  tobacco  estimated  at.  .2.^,226,874  33 

Foreign  tobacco  at 31,825.437  gs 

Algerian    tobacco    at 2,038,054  85 

Confiscated   tobacco    taken    from    dealer?      144.772  15 


i 


5",-'3S.i39 


195 


28 


WII 


KRL   AXD    WHY    IM'BI.IC    0\V 


NERSini'     HAS    lAll.l.l) 


But  let  US  look  at  the  mc)n(.p<.ly  from  a  somevvhai 
different  standpoint.     To-day  we  may  buy  scaferlat,. 
Sca:erlati  is  a  raw  product.     Conseciuently  you  may 
imagine  that  you  have  the  r>ght  to  use  it  to  manutac- 
ture' cigarettes.     In  fact  the  Court  of  Cassation     has 
made  a  ruhng  to  that  effect.      Nothing  of  the  kind. 
The   department   of    Indirect   Taxes    (  Achmnistrat.on 
des  Contributions  Indirectes)   intervene,  and  says  to 
vou-     "You.  a  simple  individual,  cann.  •  manutacture 
cigarettes,  because  I  have  reserved  to    myselt  a  mo- 
nopoly of  this  article."  •      •  .      cf  .A  in 
The  rival  claims  of  the  various  parties  intere  ted  in 
the  sale  of  tobacco  became  the  subject  of  a  lively  dis- 
cussion between  the  tcTiacco  monopoly  and  the  Cour 
of  Cassation.     The  Finance  Law  of   1895  finally  pu 
an  end  to  the  altercation  by  justifying  the  exorbitant 
pretensions   of    the   monopoly.      It   decided   that,    al- 
though vou  can  make  cigarettes  for  your  own  personal 
u^e  with  the  tobacco  that  you  buy  from  the  govern- 
nJent,  you  have  not  the  right  to  sell  these  cigarettes  to 

your  neighbor.  . 

On  September  i"  and  18.  1903.  there  was  another 
altogether  edifying  discussion-this  time  in  the  Senate 
-upon  the  manner  in  which  the  state  treats  the  con- 
sumer.    Certain  senators  were  anxious  to  prevent  the 
French   smoker   from  smoking  anything  but  the  na- 
tional tobacco.    The  Minister  of  Finance.  M.  Rouvier, 
opposed  this  restriction,  but  at  the  same  tune  he  pro- 
.ieded  to  demonstrate  how  cavalierly  the  state  mav 
treat  the  cnisumer  who  has  no  other  source  o    appeal : 
In     1900,     he    declared,    ordinary     scaferlati     had 

'  ihe  highest  judicial  court  of  France. 

196 


FISCAL    MONOPOLIES 

been  composed  of  52  per  cent,  native  tobacco 
and  48  per  cent,  lureign  tobacco.  In  1901  the 
lipoportion  was  changed  to  54  per  cent,  native  to- 
bacco and  46  per  cent,  foreign  tobacco.  The  con- 
Miniption  decreased  4(;,ooo  kg.  (88.000  lbs.). 

What  would  a  private  company  have  done  under 
similar  circumstances?  It  would  have  restored  the 
former  proportion,  as  a  matter  of  course. 

What  did  the  government  do?  It  increased  the 
proportion  of  native  tobacco. 

In  1902  scaferlati  was  composed  of  63  per  cent, 
native  tobacco  and  T^y  per  cent,  foreign  tobacco. 

"The  number  of  complaints  increased,"  added  the 
minister  placidly. 

But  what  did  the  minister  do  about  it?  Was  any 
attempt  made  to  satisfy  the  consumer?  Did  the  de- 
partment restore  the  previous  proportions?  Not  at 
all.  The  consumer  was  induced  to  see  the  error  of  his 
complaints  in  another  way.  Smokers  had  gradually 
.ihandoned  the  degenerate  scaferlati  for  Maryland  to- 
bacco. Therefore,  the  government  conceived  the 
happy  idea  of  increasing  the  price  of  Maryland  to- 
bacco. That  would  teach  the  smoker  to  be  content 
with  the  governmenl  tobacco.  Strange  that  MM. 
(iomot  and  Ournac  should  discover  that  this  propor- 
tion (jf  native  tobacco  was  still  unsatisfactory! 

1  he  example  cjuoted  abcjve  only  serves  to  prove 
'ince  more  the  truth  of  the  following  general 
law : 

ihidi'K  conclitio}is  of  free  competition  the  producer 
has  jiiore  uectl  of  the  eonsiiuier  than  the  consumer 
of  the  producer,  and  it  is  necessary  that  the  latter  give 

1Q7 


fkc  fonncr  the  ma.uunnn   of  service  at  a  mmnunn 
t  obliged    to   subma    to    tne   ex^,cne^cs   of   tin    pro 

'^"u^h.  consumer  rvishes  to  retaliate  he  has  no  other 
.e^;,'::rnthatspeaesofstr,U^can^~- 
,,hi,h  for  him  spells  pru-atum.  ^l^'^-^^^'^ll, 
Marvland  tobacco  proves,  the  smoker  cannot  ever 
resort  to  substituting  one  product  for  another.  If  he 
n.akes  the  atten^  he  ,s  p^^al^ed.  ^^.^^^ 

.  ""'TZ  ^:t^^-         i^-  -"d  certain  tobaccos 
:!:;ec"m-^;X^thetn.e.     A-Zesuhofthis 
X.e-an  increase  m  the  annual  receipts  of    8.0^.- 
000  francs  was  anticipated    and  ^-^  7^°;^  7;5"°'   ^,^ 
irnnc-s      The  increase  was  but   10.044.000  francs, 
;      008000  francs  more  than  the  average  mcrease 
-,  f  ,nr  vnrs      The  (etailed  report  ot 

fnr  the  nrevious  tour  ncius.      •  "<-  ^ 

b  L  1  O.VS  that  ,hc  p„W,c  had  abandoned  the  use 
the  higlt-^ra<le  tobaccos,  and  was  contenfng  .tselt 
vith  caferlat,.  the  „nce  of  which  remained  the  same^ 
;:!;,ab,y  ,t  was  not  without  discreet  ,uurn,urs  th 
,he  public  resigned  itself  to  th.s  change  of  hab.t ,  b,  t 
at  1  a  the  p=Live  an.l  silent  str.fe  had  some  effect, 
Thldtree  M  ,ltu,e  .6.  ,.,m.  reOstabhshed  the  former 
rates  on  brands  the  abandonment  ol  wh.ch  would  n  aKC 

ser,;.us  inroads  upo"  'h=  l-"«'*  "'  '^^  r^'Td  ti^ 
that  is  to  sav.  the  .nore  expens.ve  scaferlat,  and  the 
more  popular  cigarettes  made  from  it. 

But  now  let  us  suppose  that  this  monopoly  on  t.v 
baceo  in  France  d,d  not  exist.     We  French  are  ^x- 


FISCAL    MONOPOLIES 


4 


tremely  skilful  in  raising  products  of  a  refined  savor, 
and  we  know  how  to  prepare  them  in  the  most  attrac- 
tive manner.  Let  us  imai^Mue.  then,  that  the  cultivation 
and  sale  of  tobaecc  were  free.  There  would  be  tens 
of  thousands  of  hectares  under  cultivation  in  those 
districts  where  the  soil  is  best  adapted  for  it.  We 
wiiuld  see  manufacturers  experimenting  with  skilful 
Mends  of  native  and  foreign  tobaccos  suitable  for 
exportation.  We  would  see  in  the  great  cities  large 
and  imposing  shops  for  the  sale  of  tobacco  like  those 
seen  abroad. 

The  department  boasts  of  the  excellence  of  its  prod- 
ucts. The  foreigner  does  not  share  this  opinion,  be- 
cause exportation  is  almost  nil — 3,547,000  francs 
($673,930)  in  IQ]!).  Yet  attempts  are  made  to  ex- 
])ort  the  home  product,  because  included  in  the  above 
figure  is  the  sum  of  83.7 1<^  francs  ($15,906)  for 
commissions  paid  to  special  export  agents. 

If  the  monopoly  contributes  405,000,000  francs 
($76,950,000)  to  the  government  on  the  ont  hand, 
it  "^  certainlv  causing  a  loss  of  many  hundreds  of  mil- 
lions annually  to  F"rench  agriculture,  industry  and 
commerce  on  the  other  hand. 

Moreover,  but  little  regard  is  paid  to  the  net  cost 
of  manufacture  and  sale.  As  a  monopoly  the  state 
has.  of  course,  a  wide  margin. 

The  books  of  the  monopoly  carry  a  kind  of  indus- 
trial account,  entitled  Capita!  dc  la  Regie.  On  De- 
cember 31.  19 10,  the  amount  was  figured  at  153,841.- 
40J  francs  07  ($29,229,881).  Nothing  more  definite 
was  given.      The  sum  was  distributed  thus: 

199 


WHKRK    AM)    WUV     I'LIU.IC    OWNERSUII'     HAS    lAILED 

Fr.  C 

Tobaccos     QO.5gO.224        07 

Biiildinc-.     42.14(5.062 

Machines     6.210.730 

Utensils,  supplies,  furnishings 5.87S.566 

Total 153,841.482        07 

This  table  is  supplenientccl  In    the   following: 

Relation  of  the  Department  to  the  Treasury. 
On  December   ]U  iQio,  the  department  owed  the  Treasury: 

Fr.  C. 

Cnpital   estimated    at 153,841.482         07 

Balance  to  be  collected  on  sales 06,084         44 

Total    153-938.466        51 

But  the  department  had  stil'  to  pay  on 

account  of  expenditures    6,504,885         75 

Fmally  it  was  indebted  to  the    Treasury 

in  the  amount  of   i47.433.58o        76 

But  what  can  the  Treasury  ('1  with  42.000,000 
francs  in  buildings  and  6,000.000  francs  in  machinery, 
etc.  ?  Surely  there  is  no  indication  here  of  an  indus- 
trial budget. 

The  tobacco  monopoly  bought  nearly  32,000,000 
francs  ($6,080,000)  of  tobacco  abroad  in  19 10.  To- 
bacco experts  visit  the  places  of  production,  meet  at 
Bremen,  and  buy  tobacco.  They  are  prepared  for 
the  business  by  the  Polytechnic  Institute.  It  is  the 
easier  for  me  to  say  what  I  am  about  to  say  since  the 
probity  of  these  agents  has  never  been  brought  into 
question.  But  what  control  can  be  exercised  by  any 
legislative  body  over  the  millions  of  francs'  worth  of 
tobacco  which  thus  passes  from  one  hand  to  another? 

200 


IISCAI,    M(»\()l'OLlES 

What    pnssilile   chance   is   there   of    fixing   individual 
responsibility  ? 

In  fact  it  cannot  he  too  strongly  asserted  that 
legislators  lia7'e  yet  to  disco-'cr  hoiv  to  interfere  effec- 
tively in  trading  operations  carried  on  by  the  state. 


2.  The  accounts  devoted  to  the  materials  and  money 
sunk  in  the  operation  of  the  chemical  match  monopoly 
for  1910  give  us  at  least  a  certain  amount  of  infor- 
mation. For  example,  the  amount  of  capital  controlled 
by  the  department  on  December  31,  iQio,  is  figured  at 
10,633,635  francs  92,  and  is  distributed  as  follows: 

Fr.  C. 

10,607,036,288   finished   matches 2,347,805        40 

18.883,104,633  unfinished  matches 672,631      53 

Other  materials  and  products 234,266        99 

Land  and  buildings 4,150,301 

Machines,  apparatus  and  other  equip- 
ment   2,531,184 

Miscellaneous  supplies   727,447 

Total    10,663,635        92 

Compared  with  the  corresponding  fig- 
ures for  Dec.  31,  1900,  the  above  fig- 
ures represent  an  increase  in  capital 
of    525.111        OS 

Distributed  thus : 

Finished  matches   353708        07 

Unfinished  matches   20,945        64 

Machines,  apparatus,   etc 301,487 

Supplies  and  miscellaneous  materials         112.458        34 

788,599        05 
Reductions 

Buildings  and  lands   263,488 

Net  increase 525.'"        05 


WHERE    .\:i>    WHY    riBI.IC    OWNERSHIP    HAS    I- AILED 


Profits 
The  receipts  for  one  yenr  imiount  to   .     42,4.35,220 
The  expenses  appearing'   in   the  hudijet 
amount  to ^'i•^3i»^7 

The  difference  between  the  receipts  and 

the  expenditures  is 3O,i0i,jy2 

If  we  add  to  this  difference  the  incre.)  ■ 
upon  the  capital  of  the  departmeni, 
which  has  been  figured  above  at 525. "> 

We  have  the  profit   for  the  year   igio, 

which    is    30,626.503 

The  profit  for  the  year  iqoq  having  been     29,832,443 


26 
SO 

76 

05 

81 

95 


We  have   an   increase  of 794.059        ^6 

Relation  of  the  Department  to  the  Treasury. 
On  December  31.   igio,  the  department  owed  the  Treasury: 


Fr. 

Capital   estimated   at 10,633.635 

Balance    to    be    collected    on    sales    for 

iQio    1,369.770     14 

For   1908    73,794     •■  1,443,564 

Total '    12,107,200 

But  the  department  has  still  to  pay  on 

expenses  of  the  year  1910 1,583,592 

Its  final  debt  to  the    treasury  is 10,525,607 


C. 
92 


•4 
09 

22 
84 


Many  otlier  details  are  found  u.  the  nages  which 
follow,  but  there  is  no  trace  anywhere  of  what  the 
English  call  "depreciation,"  that  is  to  say,  amortiza- 
tion, on  either  real  estate  or  equipment. 

The  monopoly  buvs  matches  abroad  for  3,206,326 
francs  04,  upon  which  it  pavs  671.608  francs  07  cus- 

'  These  figures,  which  do  mt  agree,  arc  copied  from  the 
official    report. 

202 


FISCAL    MONOPOLIES 


i 


u 


toms  duties,  together  with  3,oOcS  francs  04  in  the  way 
of  incidental  expenses,  forming  a  total  of  3,88o,94J 
francs  75. 

The  Minister  f)f  Finance  collects  theoretically  671,- 
r)0<S  francs  07  from  the  customhouse  upon  this 
monopoly,  and  at  least  an  >.-(iuivalent  sum  as  protii 
on  the  sale  of  the  domestic  jjruduct.  Therefore, 
his  accounts  are  just  that  much  short  at  the  end 
of  the  year.  Here  we  liave  a  hookkeejjing  artifice  so 
much  the  more  astonishing  in  that  foreign  matches 
are  prohibited  and  caiUKjt  be  brought  into  the  country 
except  by  the  government. 

3.  Tn  the  case  of  both  tobacco  and  matches  the 
term  profit  is  applied  to  the  difference  existing  be- 
tween receipts  and  expenditures.  But,  from  the 
standpoint  of  the  consumer,  this  profit  is  neither  more 
nor  less  than  a  reward  of  extortion,  since  con- 
sumers are  unable  to  procure  at  the  lowest  price  the 
goods  which  the  monopoly  forces  upon  them.  The 
word  profit  is,  therefore,  altogether  a  misnomer. 

In  1891  a  committee  (^t  the  Chamlier  of  Deputies 
suggested  to  the  various  ministers  that  government 
employee;  be  allowed  to  share  in  the  profits  of  state 
operation. 

At  hat  time  I  had  under  my  direction,  as  an  indus- 
trial undertaking,  the  old  government  railway  system. 
I  answered  that  there  were  no  profits  and  that  conse- 
(luently  they  could  not  be  divided.  But  would  it  even 
have  been  possible  to  give  to  the  employees  and  labor- 
ers connected  with  the  jirosperous  tobacco  and  match 
industries  a  share  in  the  "profits  resulting  from  the 


.'O  J 


WHERF.    AND    \V  M  V 


•UBLIC    OWNERS  I  UP    HAS    lAII.ED 


sale  of  their  products"?  There  are  no  real  p;  )fits ; 
there  are  fiscal  advantages  wrung  from  consumers. 

Many  of  tho^e  who  demand  "industrial  accounts" 
do  it  with  the  hidden  hope  that  the  dei)artments  of  to- 
bacco and  matches  are  going  to  hecome  the  jjroperty 
of  the  employees  concerned  in  their  operation,  who 
rtill  thereupon  enter  into  contracts  with  the  govern- 
ment and  thereby  ensurt  for  themselves  "a  share  of 
the  profits."  But  such  (profits  are.  as  has  been  already 
said,  only  the  result  of  extortion,  and,  therefore,  would 
inevitably  disappear  if  unsupported  by  the  laws  at 
present  in  force. 

A  fiscal  profit  should  never  he  mistaken  for  an 
industrial  profit. 


204 


CHAPTER  XX 


THE   ALCOHOL   MONOPOLY    IN    SWITZERLAND    AND 

RUSSIA 


!. 


2. 


3- 


Monopolistic  Fictions  of  Kinile  Alplave. — Monopoly 
Rejected  in  (icrniany. — No  Monopoly  in  Austria. — An 
Experiment  in  Italy. 

In  Switzerland,  the  (^l)ject  of  the  Monopoly  the  .Aboli- 
tion of  Ohmgdd  Duties. — Neither  the  Distillation  of 
Wines  nor  Stone  and  Kernel  l"'ruits  Affected  l)y  the 
Monopoly. — Ten  per  Cent,  of  the  Receipts  to  Combat 
Alcoholism.— A  Surprise  Vote. — Numa  Droz. —  Ihe 
Electoral  Premium  on  Potatoes. — Restrictions  on  Sale 
in   Switzerland. —  Fiscal    Deception. 

Russia. — Moitjik  I'orbidden  to  Drink  on  Premises. — 
Characteristics  of  the  Liquor  Traffic. — Increase  of 
Public  Drunkenness. — Declaration  of  a  Moral  Purpose. 
— Fiscal    Success. 


I.  About  thirty  years  ago  fiinile  Alglave  was  anx- 
ious to  establish  a  monopoly  on  alcohol  in  I-'rancc. 

Basing  hi^  appeal  on  authority  he  said,  with  magni- 
ficent assurance,  that  l-'rance  would  be  the  last  coun- 
try in  Europe  to  adopt  such  a  monopoly,  and  he  re- 
proached her  with  a  lack  of  progressive  spirit.  He 
cited  the  example  of  ( lennany,  where,  as  a  matter  of 
fact,  a  monopolistic  jiroject  was  submitted  to  the 
Reichstag  on  l'\'bniary  jj.  1886.  But  despite  the  in- 
tervention of  Bisinarck.  who  pointed  out  the  financial 


will  K 


h    W  II  \     ITIMK     OWN'KUSIIII'     HAS    lAII-ED 


tu'rf^->itu->  III  ilir  rnipirr  ami  tlu'  lU'cd  fiT  rctMrtninj^ 
imitiiripal  t.i\ali"!i.  llic  IjUI  was  rrjcctfil  <  m  the  JJtii 
of  March,  ti'llnw  iiil;.  hy  a  vote  d'   iSi  l"  3. 

The  ^rv:\\  di-tillers  siipjxirttMl  tlif  ijmjict  liocause 
thf  ^rivcrnnuut  iimmi^rd  t(,  hiiy  tlu'ir  alcuhnl  at  40 
mark--,  nr  10  iiiark>  mort.'  tlian  it  wa--  \V"rlh  at  the 
time — a  pmeeediti^  which  wouM  ha\e  iinnlvcd  an 
iiutrii^lil  L;in  to  them  <it"  35.000,000  niark>.  I'.ut,  al- 
th(iui,di  tlic^f  partunl'  ■  maiiufaiturer-'  ini.^hl  cuiiteni- 
platc  with  satisfactidi,  ho  iiniiiechate  proht.  the  !|nes- 
tidii  natiiralK-  amse  as  to  what  would  happiii  it",  later, 
under  various  k'uds  ot"  pres->ure.  the  i,^overiinieiU.  in- 
stead of  havm-,^  at  it--  lu'ad  a  man  like  I'isuiarck.  him- 
seli  a  prominent  distiller,  ^Ir  luld  have  statesmen  anx- 
ious not  to  arouse  any  r-u>pieion  of  favoring  these 
special  interests,  and  who,  nioreo\er,  mi,i,'iit  he  in  need 
of  revenue-  'o  li'danee  llie  Imdi^et.  It  wa<  the  ijen- 
eral  opinwui  ,;,.;;  --uen  a  monopol,-  would  increase  the 
power  id'  the  L;o\nrnment.  and  convert  the  retailers 
into  electoral  ;igeiu>.  The  (|uestion^  of  rectification 
and  exp<irtation  were  also  dehated.  Since  that  hour 
the  (|uesti'in  of  an  alcohol  monopoly  has  been  dead  so 
far  as  the  Reichsl.iL:^  is  concerned. 


Before  the  alcohol  nionopf)!y  investij];'ating  com- 
mittee of  the  Frenc'n  crovernment,  in  18S7,  M.  .Mc^lave 
expressly  declared  that  Austria  had  ado])ted  the  policy 
of  moiiopolizins^  alcoh(T  Me  even  gave  circumstan- 
tial details,  such  as  that  the  ])ricc  of  a  single  glass  was 
fixed  at  o  franc  04:  that  the  cominission  allowed 
the  ta\ern  keejier  was  \o  per  cent.,  etc.  He  fur- 
ther  declared   that   in   .Austria  the  measure   was   not 

206 


rui.  Ai.ioiidi.  MONMi'oi  V  i\  s\\  ri/i:Ri  AM)  amj  iu'ssia 


a  fiscal  niu-.  Miici-  llu-  iiulL^ct  hail  a  ^tirplits  nj  Irnm 
7  t(t  S  [ur  tciil  ,  l)ul  |j!irrl\  li\  !.,Mrnu-.  \>>  a  inaUcr 
of  fact  the  silc  >u]>ii"rt  t^r  ihi-^c  stalcnu'iils  cxi>tc(l 
ill  the  fertile  ii,iat,MiiatiMH  i,\  M.  Al^lave  hiiuself. 
There  is  iin  alcnh'  1  im  iiv  ipi  ily  in    \u  tr'n. 

Finally  M.  Al.^lnve  attcinptcd  \'<  in\"ke  the  example 
of  Italy.  In  iX'iA-  "r  seven  years  later  than  the  sittini^' 
of  the  C(nnnuttee  ahdve  referred  to.  the  Italian  t,'overn- 
ment  had  considered  the  (|iie>;iiin.  hut  ,-ny  really  seri- 
ous discussion  of  the  limpiKsition  was  defeat.N.d  l>y  the 
outcry  which  arose. 

Conse(iuently  M.  .Mglave's  art,niment  from  example 
proved  to  he  worth  no  more  tiian  all  the  others. 

Belgium  reformed  its  legislation  regarding  alcohol 
in  i8()6.  hul  the  monopoly  proposed  1)\'  the  Socialist 
group  was  rejected  without  dehate.  The  Belgian 
government  increased  the  duties  upon  alcohol  and  pro- 
l-i^^>ed  the  sale  of  absinthe,  hut  the  question  of  mo- 
nopoly has  played  no  other  role. 

2.  Alcohol  monopoly  is  actually  found  in  only  two 
countries,  viz..  Switzerland  and  Russia.  Louis  Marin, 
who.  in  i()0_'.  as  deputy  from  Var,  took  up  the  project 
of  AI.  Alglave  and  presented  it  to  the  Chamber  of 
Deputies,  said:  "Vou  all  know  that  the  monopoly  of 
alcohol  in  Switzerland  and  Russia  is  managed  accord- 
ing to  the  ideas  of  M.  .\lglave."  I  did  not  know  it. 
But,  if  either  conforms  to  the  ideas  (jf  M.  Alglave, 
they  at  least  ditTer  from  each  other. 

The  establishment  f  the  Swiss  monopoly  had  for 
its  principal  object  th^  abolition  oi  the  okmgcld  duties. 

207 


\V}£KRIC    AND    WHY    rilillC    OWM.KSIlir     HAS    FAILED 


These  were  inttr-cantonal  entrance  duties,  a  species 
of  internal  revenue  tax  at  diiTerent  rates,  upon  wine, 
cider,  heer  and  alcnlinl.  ICstahlished  in  i6  cantons  out 
of  22  tnev  had  proved  a  serious  hindrance  to  freedom 
of  trade  and  commerce  in  the  Swiss  Confederation. 
The  c(in>tituli()n  of  1848  liad  pmhiljited  any  further 
increase  of  them,  and,  in  the  ne.i^^otiations  over  the 
commercial  treaty  witli  I'rance  in  1864.  tliey  had 
given  rise  to  grave  difficulties.  The  l-'ederal  consiitu- 
tion  of  1874  had  ordered  their  abolition  after  January 
I,    1890. 

Article  31  of  the  constitution  guarantees  "liberty 
01  mdustrv  and  commerce  throughdut  the  length  and 
breadth  of  the  Confederation."  Article  2,-  enumerUes 
exceptions  to  the  above  in  the  case  of  "salt,  gunjxnv- 
der,  entrance  duties  on  wines  and  (jlher  beverages"; 
while  the  amendmen*  of  1885  adds  to  this  list  "the 
manufacture  and  ■^ale  of  distilled  beverages."  .\riicle 
32  and  fijllowing  gives  to  tlie  Confederation  "the 
right  of  establishing,  by  legislative  act.  regulations 
governing  the  luanufacture  and  sale  of  distilled  bev- 
erages"; which  declaration,  however,  is  seriously  af- 
fected by  a  (jualifying  clause,  the  text  of  which  T  re- 
pi  oduce : 

"The  distillation  of  wine,  of  stone  and  kernel  fruits 
and  their  waste,  the  roots  cjf  the  gentian,  juniper  berries, 
and  other  similar  niatfii;ils,  is  e.xceiJted  from  i'cdtr.'il 
regulations  governing  manufacture  and  taxation." 

This  clause  was  a  triumph  for  the  individual  distil- 
lers of  every  description — makers  of  kirsch.  bitters, 
gin  and  distillers  of  wine.     The  restricticms  apjjly  only 

208 


Tin;  All  OIK, I.  .M(i.\(»i'()l.V   IN   SU  irZKkLAND  AND  RUSSIA 


to  alcohol  derived  from  amylaceous  S(^urces.  The  sec- 
ond para.e^raph  of  the  above-mentioned  article  .v  adds 
that  "trade  in  non-distilled  alcoholic  beverages  shall 
not  be  subjected  to  any  special  tax  by  the  cantons." 
The  third  para^rajih  of  the  article  declares  that  "the 
net  income  of  the  Confederation  resulting  from  native 
distillation  and  the  corresponding  increase  of  entrance 
duties  upon  foreign  distilled  beverages  shall  be  divided 
among  the  cantons  in  ])roportion  to  their  pojndation 
as  established  by  the  most  recent  Federal  census." 

The  article  concludes  with  the  following  direction: 

"The  cantons  are  exjiected  to  employ  at  least  lo  per 
cent,  of  the  receipts  in  combating  boUi  the  causes  and 
the  effects  of  alcoholism."  Very  little  attention  has 
ever  been  paid  to  this  wholesome  bit  of  advice. 

It  is  to  be  easily  gathered  that  the  object  of  the 
amendment  of  October  2-,.  1885,  was  to  assure  free 
circulation  of  beverages  throughout  the  Confederation 
by  suppressing  cantonal  entrance  duties.  It  is  a  law 
of  liberty. 

On  the  other  hand,  the  mere  granting  to  the  Con- 
federation of  "the  right  to  establish,  by  legislative  act, 
regulations  governing  the  manufacture  and  sale  of 
distilled  beverages,"  certainly  does  not  imply  monop- 
oly. Numa  Droz,  then  minister  of  agriculture,  was 
opposed  to  monopoly,  but  favored  the  sujjjjression  of 
the  ohuu/iid  (iidies.  If  the  amei  i  lents  to  the  P'ederal 
constitMtion,  subnntted  to  referendum  October 
1885.  ^  f'  "t^t  absolutely  forbid  the  monopoly  of  alco 
hoi  th,y  were  certainly  not  intended  to  pave  the  way 
for  it.  On  the  contrary,  they  provided  for  a  system  of 
excise  duties  by  which  the  suppression  of  the  ohmgdd 

209 


.■)' 


U  liHKE   ANL)    WllN     I'll'.l.U 


)wm:ksiiii'   has  i-a     ed 


duties  would  bt*  more  effectually  aceoiuitlisiu'd  than  by 
a  mono])(ily. 

"In  the  eourse  of  the  discussion  in  tlie  chamber  I 
do  not  believe  that  the  word  inonojioly  was  ])rononnced 
a  sin£,de  time,"  said  Numa  Droz  in  -speaking  of  the 
sur];rise  jiroduced  when  the  Department  of  the  In- 
terior presented  to  the  Federal  council  three  billh.  two 
of  which  prt)])osed  a  monopoly.  I'pon  his  recommen- 
dation, and  by  a  vote  of  4  a'^ain-t  3.  the  I'ederal 
council  adopted  the  first  bill  pre-ented,  which  pro- 
vided for  excise  duties.  The  comniittee  of  the  Na- 
tional Council,  however,  espoused  the  bill  creatint,'  a 
monopolv.  The  majority  of  the  Council  thereupon 
capitulated,  on  condition  that  the  C^m federation  would 
not  itself  distill  alcdiol,  and  the  law  was  actuallx' 
passed  December  23,  1886.  and  ajiproved  May  15, 
1887.  bv  a  referendum  vote  of  267.000  votes  against 
138,500. 

As  the  Swiss  were  the  first  nation  to  put  into  prac- 
tice free  institution^  they  ha\e  shown  themselves  ex- 
tremely distru>tful  i/f  this  measure.  In  fact  they  have 
been  so  anxious  to  limit  their  losses  that  they  have 
decreed  that  three-fourths  of  the  alcohol  controlled  by 
the  monopoly  Tiall  be  put  on  the  foreign  market,  and 
tjuly  one- fourth  sold  at  home.  Xor  shall  this  latter 
amount  exceed  20.000  hectoliters  or  25,700  hundred- 
weight a  year.' 

It   was  expected   that   the  monojxjly   would   yield  a 
net  pr.ifit  of  8.840.000  francs,  which  sum  was  to  be 
so  divided  among  the  cantons  that  each  should  receive 
'Sec  Numa  Druz,  Ltudcs  fioiiomiiiiu's. 

210 


THE  ALCOHOL  MONOPOLY  IN  SWITZERLAND  AND  RUSSL\ 


an  amount   jimportioned   to   the   (luantity   "i   alcohol 
distilled  within  its  borders. 

The  following  table  gives  the  result  for  the  first 
five  years :  Fr. 

1887-1888   5,4^2,316 

1889  4,54/. 108 

1890  6,306,668 

1891  6,013,335 

1892  S.778,()68 

Since  1896  the  net  profit  has  been  distributed  among 
all  the  cantons  in  proportion  to  their  pojnilation.  The 
following  figures  represent  the  amounts  distributed 
from  1906  to  19 10:  Fr. 

1906  6.317.544 

1907  6,483,795 

1908  5.9B5.041 

1909   5,818,790 

1910  6,317,543 

Thus  we  see  that  the  monopoly  has  never  reached 
the  figure  anticipatetl.  During  the  last  *ive  years  it 
has  been  30  per  cent,  less  than  what  was  expected 
twenty-five  years  earlier. 

As  far  as  Switzerland  is  concerned  this  is  not  a 
disaster.  But  if  the  experiment  were  to  be  attempted 
in  hrance.  and  its  provisions  based  upon  tlie  dreams 
of  fimile  Alglave,  who  prophesied  1.500,000,000 
francs  revenue  from  it.  or  even  upon  those  of  M. 
Guillemet.  who  prophesied  700,000.000  or  800.000,000 
francs,  a  certain  deficit  of  hundreds  of  millions  must 
inevitably  have  been  the  result. 

In  France  IVI.  Alglave  has  frequently  declared  that 
the  Swiss  monopoly  was  established  first  and  foremost 
for  hygienic  reasons,  and  not   f(^r  fiscal  gain.     That 

21 1 


WHERE   AND    WUY    HUBIIC    o\\ 


NKRSIIIP    HAS    FAILED 


this  is  a  complete  error  I  have  just  sliovvn.  since  the 
Swiss  monoi)oly  was  estahhshed  for  the  purpose  of 
suppressing  the  olimycld  -'uties. 

It  is  true  that  at  first,  under  the  pressure  of  hygien- 
ists,  the  administration  furnished  absohUely  pure 
alcohol.  The  Swiss,  however,  accustomed  to  dnnkm- 
schnapps,  whuh  provokes  a  strong  irritation  of  the 
throat,  demanded  that  the  alcohol  provided  by  the  mo- 
nopoly should  give  them  the  same  sensation.  The  de- 
p•^rtment  was  forced  to  add  an  impure  grade  to  the 
rectified  ale  . hoi  in  order  to  give  the  taste  of  fusel, 
without  which  the  monopoly  must  have  gone  com- 
pletely bankrupt. 

To-day  the  Swiss  are  content  with  such  rectihca- 
tion  as  the  industry  which  sells  the  alcohol  sees  fit  to 
make. 

3.  According  to  Peter  the  Great.  "Russia's  one  joy 

is  to  drink."  However,  the  people  consume  little 
enough  of  the  more  common  forms  of  alcohol;  j.oog,- 
000  to  4.000.000  hectoliters  i  33.000.000  to  loO.ooo.- 
000  gallons)  of  wine.  4.000.000  hectoliters  of  beer, 
for  a  population  of  m.^re  than  130.000.000.  or  about 
three  liters  (3  'l^arts)  per  capita.  When  the  Rus- 
sian  wishes   to    indulge   in   his   "one   joy     he  drinks 

brandy. 

An  alcohol  monopoly  is  not  a  novelty  to  him.  it 
is  an  institution  which  dates  from  1598.  It  has 
passed  through  various  fortunes.  Abolished  in 
i88^,  it  was  reestablished  January  1.  i8.)5.  in  the  four 
provinces  of  Perm.  Orenburg.  Samara  and  (Xita.  hav- 
ing a  joint  population  of  10.000.000  inhabitants.     I  his 

212 


TTIF.  ALCOHOL  MONOPOLY   IX  .SWITZFRLAXD  AND  RUSSIA 


poijulatidti  IS  coiisiimin!;  joo.ooo  hectoliters  (5,300,000 
gallons  )  (if  alcohol,  or  two  liters  (  _-  (|uarts)  per  capita, 
less  than  half  the  consuiiiptioti  in  l'>ance. 

In  Russia  the  jieople  live  under  a  paternal  regime. 
The  emperor  is  the  "little  father"  of  his  subjects.  He 
must  provide  for  their  welfar.';  he  nn^t  watch  over 
them  and  protect  them  fnmi  evil.  The  F'iussian  i)eas- 
ant.  the  luoujik,  has  one  great  fault.  Ill  nouri-hed,  he 
loves  to  drink  :  and,  when  he  enters  a  tavern,  he  de- 
mands z-odka.  This  is  alcohol  brought  to  40  degrees 
by  an  addition  of  water.  When  he  has  i  o  more  money 
with  which  t(j  buy,  he  sells  his  cart,  his  cattle,  his  fur- 
niture. He  even  sells  his  clothes,  so  that  in  winter 
he  would  be  in  danger  of  dying  of  ojld  in  the  streets 
if  the  police  did  not  look  after  hiuL 

The  emperor  of  kus>ia  says:  "I  du  n(jt  object  to 
my  sul)jects  drinking  alcohol.  If  they  did  not  drink 
it  irreparable  injury  would  ensue  to  the  finances  of 
my  empire.  Only  I  forbid  the  moiijik  to  drink  it  in  a 
tavern."  Consetjuently  the  peasant  is  sold  a  little 
phial  oi  6,  12  or  60  centiliters,  the  cost  of  which  is 
rigidly  proportioned  t(j  the  contents  of  the  phial.  There 
is  no  object,  therefore,  in  buying  large  quantities  at 
one  time. 

Such  is  the  basis  upon  which  the  monopoly  of  alco- 
hol in  Russia  is  establislied.  What  have  been  the 
practical  results?  The  alcohol  shops  are  kept  bv  offi- 
cials who  receive  fi.xed  .salaries  of  70,  80  and  100 
francs,  with  a  maximum  of  150  francs  per  month. 
I  hey  have  no  interest  whatevc-  in  developitur  trade. 
It  is  ,1  \ery  honorable  position,  about  one-thirtieth  of 
these  ;;L;riits  being  members  of  the  nobility. 


WHERE   AN1> 


WHY     I'UULK-    OWNERSHIP    HAS    EAH.ED 


These  alcohol  shops  have  certain  pecuhar  character- 
istics Thev  have  neither  corkscrew,  glass,  nor  chair 
The  phial  that  they  sell  is  sealed  with  a  7'ignctte,  and 
it  is  abs.  lutelv  prohibited  to  uncork  it  upon  the  pi  m- 
ises  The  customer  enters,  pays,  and  takes  the  phial 
away  with  him.     The   shop  is   in  no  sense  a  public 

house.  r  .  •    1    ..1 

The  moiijik.  once  in  possession  of  his  bottle,  goes 
out  of  the  shop,  .\rrivin-  m  the  street  he  hnds  a  street 
vendor,  who  possesses  what  he  has  been  unable  to 
find  in  the  shop,  namelv.  a  corkscrew  and  a  glass.  1  He 
vendor  offers  him  the  use  of  these,  with  a  crust  of 
bread  and  a  piece  of  lurnng.  While  he  uncorks  the 
magic  bottle  the  moiijik  eats  the  crust  of  bread  and  the 

bit  of  hen  ng. 

But  a^  the  poor  fellow  is  afraid  of  bemg  dis- 
turbed by  ih-  p.aice,  if  he  remains  too  long  in  the 
street  he  "ulps  down  the  brandy  and  returns  to  get 
another  b.rtile.  The  final  result  is  tins :  Instead  c 
drinking  the  li(iuor  under  shelter,  and  more  or  less 
slowlv  in  a  public  house,  in  front  of  a  good  stove,  as 
was  formerly  the  custom,  the  Russian  peasant  drinks 
in  all  haste,  'in  the  open  air.  in  the  street. 

I  have  taken  this  information  from  ofticial  reports 
addressed  to  the  emperor  by  temperance  committees, 
which,  strangely  enough,  are  freciuently  headed  by 
the  collectors  of  indirect  taxes  (Directeurs  des  Contri- 
butions Indirectes)  themselves. 

All  these  reports  declare  that  the  present  system  has 
provoked  an  increa^e  in  public  drunkenness.  In  one 
citv  (Ztatooust)  alone,  from  the  ist  of  January  to  the 
i6th  of  August,  1895.  there  were  265  cases  of  public 

214 


THE  ALCOHOL  MONOPOLY   IN  SWITZERLAND  AND  RUSSIA 


(Irunkt'nnc'NS,  cdinpared  with  155  (luriiit;  tlic  ])rece(Jing 
period  —  an  increase  of  58  per  cent.  Moreover, 
whereas  the  nionu|)oly  is  cHrecting  its  efforts  toward 
the  suppression  oi  drinking  upon  the  premises,  all 
these  temperance  committees  are  united  in  the  desire 
to  reestablish  the  former  state  of  affairs  under  better 
conditions.  I'or  this  reason  the  attempt  has  i-^en 
made  to  open  to  drinkers  so-called  traktirs.  estab. 
ments  where  cakes  may  be  eaten  while  drinking  warm 
1  leverages,  Init  from  which  alcohol  is  proscribed.  Al- 
cohol is  also  excluded  from  breweries,  therefore  tlie 
moiijik  brings  his  phial  with  him  and  pours  the  con- 
tents into  +he  beer.  The  efforts  of  the  temperance 
committees  have  also  been  directed  titward  bettering 
this  condition  of  affairs. 

Serge  de  W'itte  once  declared  that  the  monopoly  of 
alcohol  in  Russia  had  a  moral,  not  a  fiscal,  aim.  To- 
day the  moral  excuse  has  been  abandoned  and  the  fiscal 
one  o])etdy  proclaimed.  The  receipts  from  the  monop- 
oly plav  to(j  important  a  role  to  be  tampered  with. 

As  1  have  already  stated,  from  the  fiscal  point  of 
vuvv,  the  monopt)ly  lias  been  a  success.  In  the  pre- 
liminary budget  for  1912-1913  it  is  estimated  at  763,- 
925,000  roubles  ($393,421,000),  in  a  total  budget  of 
2,900,000,000  roubles  ($1,493,500,000).  It  repre- 
sents more  than  26  per  cent,  of  the  total  revenue.  In 
Russia  there  are  not  as  many  alcoholic  drinks  as  in 
b" ranee.  The  z'odka  of  the  monopoly  may  satisfy 
the  moiijik,  but  it  would  certainly  never  satisfy  the 
"majority  of  Frenchmen.' 

'  See  Appendix  "A." 


CHAPTER  XXI 

FINANCIAL   DISORDER 

1.  Parliamentary   Control. — Jules   Roche. 

2.  The   N'ational   Printing  Office. 

3.  The     Administration     of     the     Navy.— The     Work     at 

Guerigny. 

4.  Cost  of  Naval  Construction. 

5.  Postal    Service.— Telegraphs   and   Telephones. 

6.  The  Telegraph   in   (ireat    Brita.n. 

7.  British   Postal   Savings   Banks. 

8.  Plans   and   Regulations   of   Budgets. 

9.  Dissimulated  Loans. 

I.  lilies  Roche,  contemplating  the  consequences  of 
the  purchase  of  the  Western  Railway  of  France,  re- 
marked of  the  whole  transaction: 

"I  am  considering  only  one  detail  of  the  plan,  namely, 
the  creation  of  a  special  budget  of  the  future  system, 
with  its  special  debt,  its  loans,  and  its  special  titles. 

"Are  we  to  have  two  public  debts  in  France?  A 
public  debt  pure  and  simple,  such  as  already  exists,  se- 
cured by  the  general  resources  of  the  nation,  and  another 
debt,  a  new  debt,  contracted  by  the  state  railway,  and 
consequent! V  a  state  debt,  secured  by  the  same  resources 
as  the  present  debt,  and  secured  besides,  in  a  supple- 
mental fashion,  by  the  railroad  system  itself?  If  not, 
the  term  'special  loans'  is  without  meaning. 

216 


riNAXCIAL    DHORDER 

"What  -Oil  of  financial.  If^'al  or  political  idea  is  this? 
is  such  a  concci)lit)n  tinancial,  legal  or  ])olilical  at 
all?  N  this  hookkccpinL;  '  1  Icrc  is  surely  something  that 
the  decree  of  i86j  did  lujt  foresee!  And  what  would  he 
the  future  of  such  a  plan  if  il  were  ever  adoiJted  l)y  the 
great  stale  railways. ' 

"We  should  shortly  have  postal  loans,  telegraf)h  and 
telephone  loans,  match  loans,  tohacco  loans,  loans  on 
coming  monopolies,  such  as  alcohol,  sugar,  insurance, 
and  petroleum." 


At  present  Socialists  are  al)andr)ning  the  Marxian 
tluory.  as  llie\'  (lrii])i)ed  the  theories  of  I'Durier,  Cabct, 
Luuis  Ijlanc,  Prudhnninie,  etc.  I'he  more  ])rogressivc 
are  seeking  new  theories.  They  assume  th  it.  if  private 
enterprise  is  .supjiressed.  slates  and  municipalities  will 
produce  all  things  iiecessar\  t<i  m.in  much  more  abun- 
dantly, and  in  a  much  more  regular  auil  economic 
fashion  than  private  enterprise  has  succeeded  in  do- 
ing. They  have  made  u\)  their  minds  that  all  economic 
activity  ought  to  be  transformed  into  public  services. 
This  is  their  postulate. 

But  they  have  neglected  to  fortify  their  theories 
A\ith  facts.  Universal  ex])crience  has  proved  that, 
whatever  a  state  does,  it  does  at  a  higher  cost  than 
private  individuals  or  groups,  and  that,  far  from  con- 
centrating its  attention  upon  the  true  f)bjective  point, 
il  always  drags  in  foreign  considerations,  which  ruin 
the  enterprises  of  which  it  has  assumed  the  direction. 
Accounts  are  confused  in  such  a  way  as  to  make  it  next 
to  impossible  to  discover  either  net  cost  or  the  true 
income.  Although  sheltered  from  competition,  instead 
of  being  agents  of  progress,  such  undertakings  foster 

217 


WIIKKi:    AM)    \\]\\     rM'l'.I.K-    OWNKKSIIir     II  AS    lAli.ED 


nmliiii;,'  Iml  k-thar^n-;  and,  uliilc  arcdiiiplishmg  so 
little  liiciii-(l\c'>  llu'v  hldck  the  way  ol  tlie  more  pro- 
ductive enterprises  ol'  ollier>. 

Municipalities  move  aloiit,'  a  straiLjIuer  i)ath.  hut  tlie 
same  ilefects  are  apparent  in  municipal  trading  ojiera- 
tIon^  that  we  lind  in  >tale  undertakings.  Whence  we 
may  conclude  that  Municii)al  Socialism  is  only  another 
condemnation  of  State  Socialism. 

Yet  has  Miuiicipal  Socialism,  do'^'i  to  the  present, 
at  least,  ahated  its  eners^y  in  tliL  estal)lishment  ot 
public  tramways, t,^as. electric  li.^htint:.  telei)hones,  water 
works  and  chea])  housing?  And.  since  it  has  failed  in 
these  enterprises,  what  wmtld  be  the  result  of  similar 
experiments  with  footl  sujjplies,  dressing,  heating  and 
otherwise  occupying  and  amusing  the  ijeojjle? 

The  Chamber  of  Deputies  api>roved  article  70  of 
the  iMnance  l.aw  of  iqu,  which  created  a  species  (jf 
financial  autcjnomy  out  of  the  manufactures  of  Sevres 
porcelain  in  sjtile  of  the  sound  arguments  against  the 
measure  presented  by  Jules  Roche.  The  re.--Mll  of 
such  a  proceeding  would  lia\e  been  a  tenth  special  bud- 
get appended  to  the  '.-eneral  budget.  If  the  manu- 
facture f)f  Sevres  is  a  go\ernment  enterprise  its  ac- 
counts should  not  be  sei)arated  from  the  state  budget; 
and.  furthermore,  why  separate  them  from  the  gen- 
eral budget  while  the  manufacture  of  Gobelin  tapestry 
remains  attached?  The  article  has  since  disappeared 
from  the  Finance  Law. 

In  our  studies  of  the  adininistration  of  French 
finances  we  have  frecjuently  had  occasion  to  demon- 
strate the  incapacity  of  the  state  to  conduct  a  trading 
enterprise,  despite  the  undoubted  intelligence  of  its  ot- 

218 


FINAXCIAl.    1)IM)K|)KR 

ficials.  F\ani))lc>  alii'inid  in  iln-  admmisirat mn  nt'  the 
principal  monopolies.  We  have  .shoun  lliat  tluv  inami- 
factiire  hail  nialilu'-^  at  liiijh  cost,  and  thai  tl'(,>c  which 
c(Mne  from  ahroad  to  eke  out  our  supply  are  hettcr 
and  cheaper.  Officials  in  charge  of  these  enterprises 
have  neither  initiative  \u>r  res|)onsil)ilitv.  Thev  are 
hemmed  in  hy  re<,Milations  which  dn  imi  .-dlnw  >>i  the 
coMj)cratiiin  characteristic  i>f  private  industry.  Ke- 
sponsihility  lor  tailnii'  or  success  does  not  devolve 
ui)iin  these  officiaK  It  is  distrihuted  amonij  a  swarm 
of  aj^ents  lA  the  hierarchy,  aiul  \ani-hes  iinallv  in  some 
central  hnrcau.  ,\n\-  private  husines^  wliicii  had  In 
strnt^i^le  imdcr  similar  conditions  wotdd  end  in  hrmk- 
ruptcw  Xiir  is  this  state  ni  affairs  the  fault  of  man. 
It  is  inherent  in  the  very  nature  of  the  institution 
itself. 

We  find  another  (ipportiinity  <if  demnnstratini,'  the 
truth  of  the  forei^niini;  statement  in  a  Iniildint;  enter- 
prise, the  history  of  which  dcv-crves  Ui  he  preserved. 
Such  utter  lack  of  foresi^iii  and  such  an  accumnlatinn 
"f  mistakes  are  rarely  found  in  (jne  and  the  same  busi- 
ness undertaking. 

The  enterprise  referred  to  is  the  rebuilding  of  the 
National  Printing  Office.  If  any  enterprise  could  have 
been  conducted  by  government  agents  it  would  seem 
t-i  have  been  this  particular  one:  for  it  was  conhned  to 
('instruction  work  liased  on  rigid  specitications.  W'e 
have,  it  would  seem,  enough  state  architects  to  bring 
such  a  work  to  a  successful  cnnchision.  'v'ct  the  failure 
was  complete,  and  the  budget  suffered  ^^rievously  in 
consenuence. 


219 


WIIIRK    AMI    Win     II    111  U     <»\VNKI<^IIII'     ll.\.    lAll.KD 

111  tilt  lii-iiuiiiiL,'  iIk"  j<i1)  was  .iN  iiillnus:  '  lo  re- 
linild  thf  XalMiial  rniitiuf^  Oftice  u\n<n  a  lu-wly  ac- 
(|uirc(l  site,  ami  to  sell  the  IniildiiiKs  and  ^mmid  in  the 
Rue  Vit'ille-thi-'reniple  previously  <iciiii)ied  by  the 
oftice.  The  ot'licials  iu  eh:  ry:e  presented  the  Idllownig 
preliminary  report  to  the  ChanilKr  of  Deputies: 

P'rancs 
Purchase   of    a    tract   of    20,000   meters,   q    Rue    dc    la 

Ci)iuentinn,  at  Clrcnello,  at  a  cost  of 1,002,350 

Complete  rebuilding  and  rcequipping  of  tlie  priminK 
olTicc  as  in  (iperation  to-day;  estimate  verified  1)>  the 
committee    in    charge 2,960,000 

Total    3.962.350 

Rut  this  figure  should  be  reduced  by  the  aiiKuiut  to  be 
realized  from  the  sale  of  the  property  in  Rue  Vifille- 
du- Temple.    This  has  been   fiy '.  at    a    niiiunnnn   of     ,^420.000 
Sale    of   old    materials loo.aw 

Total   ,^5_'0,ooo 

Therefore,  taking:  all  these  facts  into  cousuloratioii.  the 
Treasury  should  only  lie  called  upon  for  a  net  i  x- 
peiuliture  of   44-^.350 

liitortunately  the  iiiaiiat;ers  of  the  undertaking  had 
forgotten  to  look  at  their  problem  from  all  sides,  and 
rarliament  made  a  great  mistake  in  not  perceiving 
this  In  time. 

In  the  tirst  place,  it  was  an  act  of  presumption  on 
the  i)a.-t  of  the  otiicials  in  charge  lo  think  of  selling  the 
old  ])alace  of  the  Rohans,  then  occupied  by  the  Na- 
tional Printing  Office.  Naturally,  protests  arose  from 
all  sides  against  the  sale  of  this  landmark  of  the  past, 
which  kept  alive  the  memory  of  the  famous  Cardinal, 

'  The  report  to  the  Chamber  of  Deputies  by  Emmanuel 
Brousse  on  Ucc.   12,  1912. 

220 


FINANCIAI,    DISOKHKR 


.111(1  t(i  wliuli  were  att.idu'd  ^o  many  ntlirr  historical 
rfcollcctioiis.  Its  possession  was  i  li\  puthciical  and 
contin^fnt  asset,  it  is  true,  but  the  attempt  tf  make  it 
balance  the  e\[)en(Iiture  oui,'lit  ne\'er  to  have  been  seri- 
"usly  C'lnsiderid  This,  however,  is  not  the  point  <d' 
view  from  whuli  the  jiroeeedint,'  i-  m<i>t  open  tn  criti- 
eism.  Where  the  mistake  becomes  inexcusable  is  in 
the  estimate  of  the  probable  expense  nf  rebnilding. 

The  committee  ileclared  to  the  Chamber,  when 
presenting  it  with  the  estimate  >>i  its  architects,  that 
ihe  rebuilding,'  \v..nld  <  ,st  in  all.  incindint;  (irdinary  nns- 
calculations.  a  Mini  di  _'.«)()0.oo()  francs,  and  that,  with 
this  credit,  all  the  work  could  be  carried  on  upon  a 
i^enerous  scale.  P.nt  m  order  to  reduce  his  original 
estimate,  which  had  been  ,5.734.000  francs,  to  the 
tijrure  just  quoted,  the  architect,  with  the  appnjval  of 
the  committee,  had  had  to  leave  out  one  story  in  most 
of  the  wings,  thus  reducing  the  floor  space  in  the  shfips 
by  7.000  S(|uare  meters  (  7.70S  s(|uare  yards).  \cl. 
<lespite  this  effort,  in  U)04  the  committee  had  to  report 
a  deficiency  of  1.500.000  francs  in  the  preliminary  es- 
timate for  the  construction  of  the  new  builrling. 

In  the  following  year  it  was  discovered  that  the  esti- 
mate contained  no  provision  for  the  installation  of 
either  heat,  light,  or  motive  power  for  the  mechanical 
e(|uipment.  Conse(|uentl\  a  new  item  of  750.000 
francs  had  to  he  added  to  the  previous  amount.  Then 
there  had  been  no  provision  in  any  of  the  jilans  for 
housing  the  directorate  and  the  subordinate  function- 
aries. According  to  the  documents  submitted  by  the 
I'-udget  Committee  the  expense  of  rebuilding  the 
property  on  the  Rue  de  la  Convention  must  ultimately 


I  ( 
1>  f 


WIIHRK    AND    WHY    PUBLIC    OWNERSHIP    HAS    FAILED 

amount  to  (),_'io.ooo  francs.  'I'lio  Chamber  had  been 
tolil  that  it  would  only  l)e  2.()00.ooo  francs.  The  ag- 
"rc"-atc  difference  between  estimate  and  expenditure 
amounted  to  3.3"  0,000  francs. 

Finallv  to  this  difference  of  3.310,000  francs  should 
be  adde(i  the  loss  that  the  budget  will  suffer  by  reason 
of  the  failu"  to  sell  the  de  Rohan  palace.  Later  sev- 
eral more  mistakes  were  discovered. 

At  the  end  of  December.  19 12,  when  the  expendi- 
ture alreadv  incurred  amounted  to  10,445,000  francs. 
tl  e  committee  made  application  for  a  further  credit 
of  4,336,000  francs  to  hnish  the  work. 

It  Vs  understood  that  no  one  can  be  held  directly 
accounta1)le  for  this  state  of  affairs.  The  responsi- 
bility rests  with  the  committee  in  charge  of  the  work, 
which  managed  the  affair  badly,  and  with  the  other 
committees,  which  helped  to  cover  up  official  blunders. 
This  example  is  typical  of  the  arrant  folly  only  too 
common  in  the  conduct  of  state  enterprises,  and  proves 
once  more  tliat  a  guvernment  is  far  less  skillful  than 
are  individuals  in  the  direction  of  such  enterprises. 

3.  ILich  vear  the  reports  of  the  postoffice.  telegraph 
and  telephone  syslcfus.  and  even  of  the  Xavy,  show 
ihe  disorder  to  which  all  state  operations  are  liable, 
^'et.  although  comi)laints  of  maladministration  of 
these  systems  are  incessant,  do  we  not  also  know  that 
I'arlian'ient  continues  to  tolerate  insubordination  in 
the  arsenals,  increases  in  salaries,  decreases  in  tb^ 
nnmlier  of  hours  of  la])or.  and  all  those  generosities 
which,  in^tead  of  being  an  inspiration  to  production, 
amount  to  so  many  jjremiums  on  laziness?     Investi- 

222 


FINANCIAL    DISORDER 


gating  cominittees  are  appninted.     Of  whom  are  they 
composecP      Deputies    from   the   jKjrls   are   ijl.'ced   on 
Navy  investigating  boards  when   lliey  should  be  (bs 
qualified  by  the  very  fact  alone  that  the  employees  of 
the  Navy  will  be  counted  among  their  constituents. 

But  let  the  following  facts  speak  for  themselves. 
A  commission  appointed  to  investigate  conditions  in 
the  Navy  met  at  Guerigny  in  1908.  It  had  as  its  presi- 
dent, M.  Masse,  deputy  from  La  Nievre,  on  whose  mo- 
tion a  steel  plant  had  been  founded  ut  Guerigny  in 
1900.  The  commission  passed  exactly  one  day  in  the 
town,  after  which  exhaustive  investigation  of  condi- 
tions there  it  submitted  to  the  Navy  department  a 
report  calling  for  new  expenses. 

The  said  steel  plant  of  Guerigny ,  begun  in  1900,  has 
been  in  operation  since  1905.  Its  prime  nbject  is  the 
manufacture  of  Martin  steel,  and,  according  to  tlie 
authors  of  the  atnendment  which  jjrovided  foi  its  es- 
tablishment, it  should  produce  armor  i)late  at  a  price 
considerably  less  than  that  paid  to  private  c(jmpanies. 
Now  M.  Rousseau  ^  has  discovered,  and  not  without 
ditficulty.  in  view  of  the  complication  of  the  accounts 
of  the  Navy,  that  the  ecjf.ipment  for  the  manufacture 
of  Martin  steel  trust  have  already  cost  more  than 
5,000,000  francs,  whil(  the  expense  of  the  amortiza- 
tion of  this  outlay  during  ten  years,  according  to  the 
custom  in  the  industry  at  large,  is  500.000  francs. 

Unfortunately,  the  investigatintj;  committee  which, 
visited  Guerigny  declared  ( i'^  1909)  that  immediately 
after  the  establishment  of  the  steel  plant  the  use  ol 

^  Four  SaiiV'-r  QucLiues  Millions. 

223 


vvufrf.  and  why  puijlic  ()\vnp:rsiiip   has  failed 


Martin  steel  plate  had  fallen  off  c.msiderably.     I  quote 
from  their  report : 

"As  a  matter  of  fact,  the  production  is  300  tons  of 
armor  plate  a  year.  Assuming  that  this  rate  could  he 
maintained,  the  aggregate  cost  of  amortizing  the  equip- 
ment would  amount  to  1.66O  franc-  a  ton.  Moreover,  it 
is  to  he  feared  that  the  use  of  .Martin  steel  is  continuing 
to  decline.  On  the  H'aldcck-Nonsscati  there  was  37K' 
per  cent,  of  Martin  steel;  on  the  f'atric  type  there  was 
only  24  per  cent.:  on  tlK-  Danton.  \~  per  cent.:  upon  the 
Jean  Bart,  14  per  cent,  (figures  disclosed  by  the  official 
reports). 

"This  fact  is  highly  disturbing.  The  capital  sunk  in 
the  equipment  for  the  manufacture  of  Martin  steel  will, 
therefore,  never  be  recovered.  The  departiuent  unques- 
tionably made  a  mistake  when,  on  the  motion  of  M. 
Masse,  approved  by  the  Chamber  of  Deputies,  it  saddled 
itself  with  this  equipment. 

"lUit  the  commission  feels  that  the  plant  at  Guerigny 
ought  to  be  provided  with  eiiuipment  and  machines 
which  will  permit  the  manufacture  of  hardened  steel,  or 
any  other  kind  of  steel  destined  to  supplant  Martin  steel. 

"It  will  probably  be  necessary  to  abandon  the  use  of 
hardened  steel  in  its  turn.  T.ut  if  the  cementmg  furnaces 
were  used  during  only  two  cami)aign';.  it  would  be  suffi- 
cient to  pay  ofT  the  ex])ense  involved  m  installing  them." 

Tiie  Commission,  consistent  to  itself  in  its  own  in- 
consistency, then  reiterates  its  demand  for  cementing 
furnaces,  and  says : 

"Out  of  a  total  expenditure  of  5,500.000  francs  the 
cementing  furnaces  (jnlv  represent  a  very  small  sum.  since 
the  plan  provides  for  five  at  the  cost  of  70,000  francs 
apiece.      Moreover,    it    is   not    necessary    to    begin    work 

22--1 


FINANCIAL    DISORDER 

7vith  the  installatinn  of  these  furnaces.  The  construction 
of  the  new  workshop  will  take  approximately  three  year?. 
A  year  is  amply  sufficient  for  the  installation  of  cement- 
ing: furnaces.  Assuming  that  the  work  will  be  begun  (lur- 
ing the  next  year,  or  1910,  it  will  not  be  until  two  years 
after,  or  1912,  that  the  value  of  the  new  steel  manufac- 
tured at  Saint  diamond  and  at  Creusot  will  be  deter- 
mined ;  it  will  then  be  known  whether  hardened  steel  will 
continue  to  be  used  in  the  Navy,  and  whether  it  will  be 
practicable  to  provide  for  its  manufacture  at  Guerigny." 

Thus,  and  as  a  result  of  the  report  of  the  Commis- 
sion, it  appear.s  that  the  government  ought  to  be  pre- 
l)ared  to  manufacitire  hardened  steel  at  Guerigny,  and 
also  to  await  a  definite  decision  as  to  the  value  of  a 
certain  steel,  Ijefore  commencing  work  on  the  furnaces. 

The  c(jmmittee  declares  that  it  will  take  a  year  to 
install  the  cementing  furnaces;  yet  the  expenditures 
are  already  estimated  at  5,500,000  franco. 

Following  the  recommendations  contained  in  the 
committee's  report,  the  Navy  department  demanded 
400,000  francs  credit  on  the  budget  of  1911,  and  the 
Budget  Committee  was  subsequently  urged  to  raise 
this  figure  to  900,000  francs.  But,  even  with  this 
latter  credit,  six  years  would  be  required  for  the  in- 
stallation of  the  cementing  furnaces.  In  asking  for 
400,000  francs,  then,  the  Navy  was  demonstrating 
Its  skepticism,  and,  in  granting  such  a  sum,  the  Budget 
Committee  was  once  more  displaying  its  lack  of  fore- 
sight. In  any  case  both  were  wasting  funds  in  order 
to  appear  to  be  doing  something,  and  not  from  the 
point  of  view  of  the  needs  of  the  Navy,  but  from 
local  considerations. 

225 


:f       I 


WHERK    ANU   WHY    I'UBl.lC   OWNKRSIIIP    liAS    FAILED 

Up  to  191 1  the  general  expenses  at  Guerii^ny  were 
118  per  cent,  of  the  estiniated  expenses. 

The  excuse  lor  constructing,^  the  plant  in  the  first 
instance  was  that  such  an  establishment  would  "regu- 
late i)rices."  But.  in  order  to  re,i,nilate  the  jirice  of 
private  industry,  the  .i^overninenl  ou.i^du  to  oanmence 
bv  regulatinjT  its  own. 

The  Director  of  the  (iuerigny  works  told  the  In- 
vestigating Committee  that: 

••The  saving  of  at  lea>t  one  franc  per  I-:"  gram  on  the 
co>t  price  of  armor  plate  at  Cuerigny  is  also  obtained 
in  the  .nanulacture  of  s].erial  steel,  and  thi^  -aving  would 
certainly  be  continued  if  we  should  manufacture 
hardened  steel.  In  this  fact  we  have  a  serious  argument 
in  favor  t  *  tlie  e.xlension  of  the  manufacture  of  armor 
jdate.  I'v  doubling  tlie  expense  incurred  up  to  the  jires- 
ent  on  account  of  this  manufacture,  we  can  more  than 
trii)le  tbe  i)roduction  :  and  each  ton  of  armor  plate  made 
at  Gueritjnv  would  represent  an  economy  of  l  .000  francs, 
taking  into  consideration  the  market  price,  b'ive  thou- 
sand "tons  of  armor  plate  woukj  suffice  to  warrant  the  ex- 
pense of  such  an  enlargement."' 

Five  million  francs  have  already  been  expended  at 
Guerigny.  Now  the  management  suggests  a  further 
expenditure  of  ten  million^.  The  average  annual  pro- 
duction of  300  tnn>  is  to  be  increased— alknving  a 
wide  margin — to  1.000  tons  a  year,  with  amortization 
at  I  franc  per  kilogram;  or.  in  other  words,  i  .000.000 
francs  a  vear,  or  i.ooo  francs  a  ton.  "How.  upon 
5.000  t(ms  alone."  demands  M.  Rousseau. ^  "can  such 
an  extraordinary  feat  be  ;H-coniplished  as  to  put  aside 

'  See  above. 

226 


i"].\.\.\i  i.\L  iiis()ui)i:r 


J  franc  per  kilogram  upon  the  cost  oi  the  industry, 
that  is  to  say,  i  .000  francs  a  ton,  wliile  at  the  same 
time  the  e(|uipmcnt  is  amortized  at  2  francs  per  kilo- 
ji^ram.  especiall\-  when  there  is  to  he  an  expencHture  of 
10,000,000  francs?'"  ' 

The  Investit^atinj^  Committee  declared  the  net  cost 
per  k  Icitrram  of  armor  plate  ])rodiiced  at  (iuerigny  to 
he  1  franc  Jj  to  i  franc  74,  aUhough  the  charge  for 
amortization  alone  was  1   fr.anc  66  per  kilogram. 

The  report  of  this  same  committee  inspired  still 
more  caustic  comments  on  the  part  of  M.   Rousseau. - 

"At  the  jjresent  lime  it  is  supererogation  to  state  tliat 
the  (iocuments  emanating  from  the  i-'rench  Parliament 
lack  accuracy.  It  is  an  accepted  fact,  antl  is  apparent 
above  all  in  whatever  pertanis  to  the  Xavy.  That  the 
information  cor.taincd  in  these  documents  is  accepted 
without  sufficient  scrutiny  has  been  proven  again  nnd 
again.  It  has  been  proven  also  that  investigations  are 
not  made  with  all  the  care  desirable,  b^or  example,  we 
read  in  the  report  of  the  Committee  appointed  to  investi- 
gate conditions  in  the  Xavy  that  'the  cost  of  turbines  ap- 
pears p.articularly  exaggerated.'  In  the  first  place,  what 
is  this  word  'a])pears'  doing  in  the  conclusions  of  an  in- 
vestigating committee'  Why  didn't  the  Committee  get 
to  the  bottom  of  tlie  matter?  What  basis  of  judgment 
did  it  have.-  The  ])r(.niiscs  were  as  follows:  we  quote 
the  rejjort : 

"  'Justut',  reciprDcaling  engine,  18,500  h.p.,  2.0l4,OCXD 
francs. 

"  'I'oltairc,  turbine,  _'j,500  h.p.,  4,800.000  francs. 

'  L'Informateur  Parlcmentairc. 
■  Sfe  above  citation. 

22y 


WHI-.KK    AN1>    WHY    IMMU.U;    OWNKUSllIl'     HAS    l-AH-KD 

••  •  \t  the  same  rate  of  eost  as  the  engine  on  tlie  Justice, 
a  reciprocating  engine  of  J2.500  h.p.  would  cost: 

22,500 

2,6i4,oooX =3.267.500  francs 

18,500 

"The  turbines  have  thus  cost,  per  man-of-war  1,- 
=  V  500  francs  more  than  reciprocating  engmes,  or  about 
io,oio,ooo  francs  for  the  six  men-of-war.  In  reahty  the 
turbine,  are  less  expensive  to  ccnstruct  than  reaprocatmg 
engines.  As  a  resuU,  there  is  a  colossal  proht  for  the 
contractors  after  deduction  of  all  their  expenses  It 
appears  beyond  doubt  that  the  Xavy  has  paid  much  too 
high  a  price  for  the  turbines.' 

••It  is  a  universally  admitted  principle  that  like  objects 
alone  are  comparable.  It  is  well  that  it  did  not  occur 
to  the  author  of  the  little  .alculation  quoted  above  o 
compare  turbines  with  automobile  motors,  because,  with 
the  same  serenitv,  he  wouUl  have  declared  the  contractors 
absolutely  ruined,  rendering  the  stock  of  the  r  dock  yards 
valueless,  while,  on  the  contrary,  he  has  given  them  an 
enhanced  value." 

4.   In  any  estimate  of  cost  price  there  are  two  fac- 
tors, direct  expenses  and  general  expenses. 

In  the  navv  yards  general  expenses  are  undivided 
expenses,  unifnrnilv  cominited  at  2H  per  cent,  of  labor 
costs  In  the  ca>e  ..t  the  Jrau-Bart  they  were  coni- 
ptUc<l  at  24  per  cent.'       The  proportion  is  a  purely 

arbitrary  one. 

M.    Kl.^z.    then    r,eneral    Secretary    (Rapporteur 

Cc-neral).  has  said  in  th^  connection: 

'  Rousseau.     Pour  SaH7'er  Quclqucs  Millions,  see  Journal  des 
£conomistes.  Dec.  31.  "^"■ 


FIN'.WCr  \1 


/i.SDi'DFK 


"In  the  cost  of  work  doiiL  by  arsenal-^  the  followiii!,^ 
expenses  appear : 

"a.  Expenses  of  operating  the  workshops  of  tlic  ar- 
senal, etc. — kil)or  expenses  and  cost  of  snpi)hes  (coal, 
dynamos  of  workshop  motors,  etc.),  called  undividetl  ex- 
penses. 

"b.  Expenses  of  equipment,  applied  especially  to  new 
construction  :  the  small  eciuipnient  used  in  Iniilding  ( tools, 
horers,  electric  apparatus,  stationary,  construction  stocks, 
and  a  certain  number  of  macliine  implements). 

"Among  general  expenses  are  not  included  : 

"c.  Wrongly,  we  think,  the  salaries  of  technical  em- 
ployees, engineers,  and  their  assistants  engaged  solely  in 
construction  work.  These  are  paid  according  to  regula- 
tions contained  in  special  chapters  of  the  budget.  The 
cost  of  a  ship  constructed  in  the  arsenal  would  be  in- 
creased so  much  more. 

"d.  Rightly,  the  expenses  of  large  equipment:  An  ar- 
senal is  necessary  in  time  of  war.  I'rom  this  \  iewpoint 
workshops,  dry  docks,  derricks,  etc.,  are  prime  necessities. 
In  time  of  peace  the  state  must  choose  between  two  prob- 
lems:  to  leave  this  equipment  unused,  or  to  employ  it.  in 
new  construction.  The  state  has  an  evident  interest  in 
adopting  the  second  solution.  .Xs  the  equipment  would 
exist  even  if  there  were  no  new  construction,  it  is  legiti- 
mate not  to  include  expenses  of  this  character  in  the  cost 
of  such  construction." 


Whatever  else  he  may  say  M.  Klotz  at  any  rate 
acknowledges  that  general  expenses  are  not  accounted 
t(jr  in  the  Navy.  The  distinction  which  he  makes 
between  the  material  to  he  accounted  for  and  the  ma- 
terial not  to  be  accounted   tor,  in  the  cost  of  a  ship, 

229 


WIII.KK    AND    \\\l\    ITIM.IC    OW  N  I- KSI I  1 1'     HAS    IA1I.KI> 

is  a  (ifinoiistration  in  it'-clf  of  the  arbitrary  cliar- 
actcr  of  construction  estimates:  As  e(|ni|)nicnt  is  used 
and  replaced  durint,'  times  of  j)eace,  it  is  onlv  just  to 
add  to  the  oris^inal  cost  of  the  prochicts  manufactured 
the  cost  of  the  ccfuipnient  used  in  such  manufacture. 

The  Navy  department  had  fixed  the  net  cost  per 
ton  of  the  three  steel  cruisers.  Jules  Ferry,  Leon  Cam- 
bctta  and  J'ictor  Jingo  at  2,211  francs,  2,230  francs, 
and  2,286  francs,  respectivclv. 

The  Committee  of  .\ccounts  on  the  work  raised  the 
general  expenses  from  12  to  23  per  cent.,  so  that  the 
cost  per  ton  came  to  2,512  francs  for  the  Leon 
Gambctta,  2,605  francs  for  the  /  'ietor  lingo,  and 
2,717  francs  for  the  Jules  l-erry,  a  cost  hisj^her  than 
that  of  similar  shij)s  constructed  by  private  companies. 
We  (juote  in  full  the  two  estimates  : 

Official  Cost  Real  Cost 
Fr.  Fr. 

Leon  Gambctta  27,q<)8.858  31.530,858 

Jules  Ferry  -7.737.364  34. 1^3.364 

Victor  Hugo    28,689.964  33.951,964 

In  the  case  of  the  Jules  Ferry  a  covered  stocks  was 
erected,  which  was  used  only  (juce,  because  the  Jules 
Ferry  was  the  last  large  boat  constructed  at  Cher- 
bourg. 

5.  In  the  report  of  M.  Dalimier,  on  the  postal,  tele- 
graph and  telephone  services,  for  the  budget  of  1912, 
repetitions  of  the  usual  comi)laints  are  to  be  found: 
Absence  of  preliminary  estimates,  apparent  impossi- 
bility for  the  department  to  furnish  any  indication  as 
to  the  total  expenditures  to  be  covered,  etc. 

2'i.O 


I-INANCIAL    DISORDER 


I 


I 


I! 


M.  Dalimicr  says : 

"As  presented,  the  biulf^et  of  the  postal,  tclejrraph  and 
telephone  serviees  ■  is  indefinite.  It  e.,ntains  certain 
minute  detads  ulneli  make  the  total  absence  or  the  insuf- 
ficiency of  information  regardinjr  really  important  ex- 
penses appear  the  more  rep^rettahle. 

"I  he  utter  lack  of  coordination  results  in  the  juxtapo- 
sition of  partial  accounts,  prepared  and  presented  with 
a  disin^remiousness  wiiich  justifies  all  criticism :— general 
lack  of  method:  too  little  attention  to  financial  rules  and 
true  bookkeepin,[,r  principles  ;  no  limit  to  the  expenses  when 
the  sources  of  loans  are  abundant :  accounts  which  are 
not  sufficiently  definite :  frequent  disorder  in  the  prepara- 
tion and  execution  of  the  work  as  well  as  in  the  man- 
agement of  the  loans !" 

In  f'mil  Dnpont's  report  to  the  Senate,  regarding 
this  same  budget,  I  read : 

"Many  of  these  plans  were  not  thoroughly  deveiooed 
when  appropriations  were  ask^d  for.  In  putting  down 
200,000  francs  as  the  cost  of  inaugurating  the  work  of 
cnlargnig  the  administrative  offices  of  the  service  and  re- 
Imilding  the  Postoffice  itself,  the  department  was  simply 
taking  a  figure  at  random.  It  acted  in  ignorance  as  to 
what  part  of  the  work  the  sum  was  to  be  applied,  nor  is 
the  (kpartment  yet  aware,  probably,  how  the  money  is  to 
be  divided  between  the  two  buildings  which  are  to  be 
rebuilt. 

"The  same  statement  holds  good  in  the  case  of  the 
baggage  department  of  the  Ra^tern  .ailway  station  of 
I'aris.  The  flcpartment  demanded  100.000  francs  and 
found  out  afterward  that  70,000  francs  would  suffice  for 
1912. 

'  See  Journal  dcs  ficoiiomistcs,  March  5,  igi2. 


WHRRK    AND    WHY    IM'IillC    OW  N  KKSH 1 1"    HAS    lAII.KI) 


"Tlifsc  f)vtTestiniatcs  in  tlic  case  of  iiiiporlaiit  loans 
have  lietii  ^'oiiijj  on  for  some  yeuis.  and  are  a  direct 
result  of  the  carelessness  of  tlio^e  in  cliart^e  of  Imildinj,' 
loans.  As  further  examples,  we  ini^iit  cite  the  substa- 
tions of  Martifjnac.  uo.ooo  francs;  Rue  lUrtrand.  I15.- 
000  francs;  and.  in  the  city  of  Lyon,  ^lO.ucx)  francs." 

The  report  of  M.  Dalimier  shows  up  an  ingenious 
administrative  trick,  characteristic  of  a  jjarticiilar  psy- 
chol(),i,M'cal   state. 

But  let  us  take  another  very  similar  example  oi 
the  same  tendency.  In  km  i  the  Postoftice  department 
demanded  a  loan  of  5_>j,i35  francs  for  wi^-k  un  vari- 
ous posiotl'iccs.  In  i9i_'  it  asked  again  for  an  abso- 
lutely identical  amount.  The  first  loan  was  applied  to 
work  then  going  on;  the  second  had  for  its  object  the 
depreciation  of  work  concerning  which  there  has  never 
been  any  discussion,  and  which  will  re(|uirc  an  expendi- 
ture of  585,000  francs. 

A  "passion  for  spending"  is  characteristic  of  all  pub- 
lic departments.  The  Daliiuier  report  states  that  the 
work  of  reconstruction  going  on  at  the  central  tele- 
graph ofifice  was  started  only  by  tiic  aid  of  a  loan  of 
100,000  francs  obtained  in  1908;  and  that  each  of  the 
following  years  -iw  this  figure  grow,  little  by  little, 
until  it  stopped  finally  at  979,000  francs,  not  includ- 
ing the  100.000  fraics  demanded  in  19 12  for  the  in- 
stallation of  a  low-pre;  sure  heating  svstcrn. 

The  report  of  M.  Daliinier  also  furnishes  a  certain 
number  of  characteristic  figures  concerning  the  Post- 
of^ce  expenditures: 


FINANCIAL    DISORDER 

Expon.irs  Exp^ns^g 

Providtd  f(T  Iniurrrd 

^                                                                                ^'r.  Fr. 

^y""    5IO.S.S.1  826,401 

f,'''"K"=>'^      750.000  870.48. 

^"J""    •■•••- 74.?.05O  „sH../,. 

Kne    Her  rand  6,0,000  75,,483 

Bureau  des  Archives    1,000,000  2,650,370 

In  the  case  of  tlic  telephone  .jffice  in  the  Rue  des 
Archive,s'  the  preUniinary  estimate  of  expenditures 
covering  purchases  of  land  and  construction  reached 
1,900,000  francs,  while  the  entire  building  will  cost 
2,6ij2,202  francs.  Assuming  that  half  the  huilding 
"f  the  Bureau  of  Archives  is  to  be  devoted  to  a  multi'^ 
pie  switchboard,  designed  for  500  subscribers,  each 
subscriber  will  cost  the  state  269  francs.  It  is  true 
that  "immense  hallways  and  superb  galleries,  offices, 
rest  rooms,  and  rooms  open  to  20,000  subscribers"  are 
to  be  found  there. 

6.  The  celebrated  manufacturer,  H.  Laws  Webb  at 
a  meeting  of  the  London  Chamber  of  Commerce  on 
bebruary  17,  1911,  and  the  Spectator,  as  well,  have 
made  public  the  serious  embarrassment  which  the  op- 
eration of  telegraph  lines  has  entailed  upon  the  English 
government. 

Forty-f^ve  years  ago,  in  1866,  the  government  first 
proposed  the  purchase  of  the  British  teles^raph  lines 
then  valued  at  57.500,000  francs  ($10,925,000).     Ne- 
gotiations lasted  about  three  years,  or  unti'l  1869,  ^vhen 
Parliament    appropriated    175,000,000    francs    ($^S'- 

.JlZ.t^  ^^"''"  '■^^"'^  °^  ^^^  '"•  '9".  "Pon  a  demand  for 
supplementary  appropriations. 


WIII.KK    AM.    UIIV    ITIIMC    OWNKKSIIII'    HAS    lAII.KU 


250. ()()())  I'.ir  tlic  i-arryins- out  "l'  tlu'  piirrlinsi-.  Mr  inore 
tli.iii  thrrc  times  tlu'  orij^nHal  rstmirilc.  Mnn'ovcr,  llii- 
K"\cTiimciit  was  i'^rvvA  in  pay  a  furtlur  sum  n{  10.),- 
cxx).0()()  t'raiK-s  (  $i<),ooo.O(K)  )  t.,  the  raiKva\  cnmpa- 
nii-s  fnr  lluM-  ri^rhts  ,,vrr  the  tele^^rapli  hues  estahhshed 
al.m.t;  tin-  railpMad  traek.v  Therclnr.',  the  complete 
aciitiiHtioii  ot  the  tiiKlertakiiij,'  cost  the  I'.ritish  t,'o\crii- 
uient  J7 5, ()(,<). ()()()  t'rancs  ($52,250,000). 

It  had  heeii  ])re(hcted  that,  (hinii-  ilie  course  of 
stjuic  twenty  year>,  tlie  net  returns  from  the  operation 
of  the  tek;t,'raph  would  contribute  tou.ird  a  very  sensi- 
ble .educti.in  of  taxation.  Ihu  this  dJusion  (|uickiy 
vanislied.  'j'liere  was.  it  is  true,  a  small  net  i)rolit  in 
the  tir.st  two  years  of  state  oi)eration,  hut  afterward 
the  receipts  were  never  sulticient  to  meet  the  interest 
on  the  capital  invested:  and,  during;  thirty-iune  years, 
this  enornxius  deiicit  has  !)een  borne  by  the  Treasurv, 
that  is  to  say,  by  the  iteo|)le, 

I'lnally,  under  the  pressure  of  pui)Iic  opinion,  which 
had  anticipated,  a>  a  conse(|uence  of  sucli  a  measure, 
ail  increase  in  business  and  conse(|uentlv  oi  receipts, 
telegraph  rates  had  to  be  reduced.  The  result,  how- 
ever, was  exactly  the  opposite  of  what  had  been  prcjph- 
esied.  On  the  one  hand,  die  expenditures  for  main- 
tenance and  operation  increased  enormously  un('cr 
S:<ivemment  administration,  while  the  necessary  keep- 
uvy  up  to  date  of  the  installation  rendered  the  receipts 
more  and  more  insuftlcient  and  the  demands  on  the 
treasury  more  and  more  insistent. 

When  one  takes  into  account  all  the  elements,  and, 
more  especially,  the  amount  of  the  ori.^dnal  capital. 
which  has  never  been  paid  off,  the  advances  made  by 

-34 


FINANCIAL    DISOKOKR 

Parliament,  which  have  never  drawn  anv  interest,  and 
the  annual  dedchs  ..n  (iperatm,,,  the  total  conin' -n  .al 
loss  cansc-d  I.,  the  o.niitry  hy  the  innchase  .,t  the  tele- 
graph  anionnts   at    least    to   £35,000.000    (.S170.450- 
000).     The  l-.n^iish  taxpayer  has  not  even  the  conso- 
latinn  o\   tlnnkin-  that   the  ^overnnieiit   possesses  an 
appreciable  a>set   to  offset   this   loss,  because,   in   the 
case  ol  this  particular  ente-prise.  each  year  <jf  its  op- 
eration entails  a  >uppleiiieiKarv  loss  of  more  than    >;  - 
000.000    francs    (.$4,750,000)'.      hrom   a   commercial 
point  of  view  the  purchase  has  been  a  complete  failure. 
The  English  press  makes  the  following  comments: 
The   partisans   of   government    ownership    invariably 
reply  to  the  charge  th.it   the   British   telegraph   lines 
have  been  a  heavy  financial  burden  to  the  taxpayers 
with  the  statement  that  the  public  has  received  com- 
pensation in  the  form  of  a  better  and  cheaper  service. 
I  his  assertion  is  plausible,  but  not  convincing.     Even 
It  It  were  sound,  one  would  be  forced  to  ask  by  what 
right  the  whole  body  ,)f  taxpayers  is  made  to' subsi- 
dize people  making  regular  use  of  the  telegraph  but 
constituting  a  minority  i>\   the  population?     The  ex- 
pense of   operation   per   million   telegraphic   words   is 
actually  more  than  it  was  thirty  years  ago  in  Great 
Britain. 


7-  At  a  conference  of  postal  employees,  held  at  Les- 
lie. April  18.  1911.  Mr.  Crosslev  declared  that  the 
Postal  Savings  Bank  suffered  an  annual  loss  of  100- 
000  pounds  sterling  ($487,000).  due  to  bad  adminis- 
tration and  bad  investments.^ 

'The  Monniig  Post.  April  iq.  iqh. 


WHERE    AND   WHY    PUBLIC    OWXERSltIP    HAS    FAILED 


8.  When  I  was  a  member  of  the  Municipal  Council 
of  Paris,  of  the  Chamber  of  Deputies,  and  the  Budget 
Committee,  1  watched  with  the  greatest  interest  the 
infinite  pains  taken  by  my  colleagues  to  set  down  on 
paper  (by  decreasing  the  preliminary  estimates  of  ex- 
penses and  increasing  the  provisional  receipts)  a  bal- 
ance in  which  the  receipts  would  present  a  more  or  less 
insignificant  surplus.  As  General  Secretary  of  the 
budget  I  was  accustomed  to  place  at  the  head  of  my 
report  the  estimated  figures  of  the  budgets,  as  voted, 
together  with  figures  of  the  supplementary  appropria- 
tions which  usually  had  to  be  added  during  the  year. 

In  a  long  financial  discourse  before  the  Chamt  of 
Deputies  Fernand  Faure  defined  the  theory  of  two 
budgets :  the  esamated  budget  voted  and  the  real  bud- 
get spent. 

At  the  present  time  the  Chamber  of  Deputies  spends 
weeks  in  examining  the  plan  of  ihe  budget.  On  Oc- 
tober 23.  1884,  in  one  single  sitting  the  accounts  of 
1 87 1,  1872,  1873.  ''i"*^!  1874  were  a])j)rovcd.  In  one 
single  sitting,  also  the  accounts  of  1876,  1877,  1878, 
1879,  were  accepted  and  this  11,  10,  9.  and  8  years, 
respectively,  after  the  close  of  the  years  concerned. 

In  191 2  the  Con  mittee  on  Final  Accounts  of  the 
budget  decided  to  examine  in  detail  the  accounts  sub- 
mitted to  it.  The  first  report,  published  in  July  of  the 
same  year,  and  the  work  of  Louis  Marin,  relates  to 
the  accounts  of  the  minister  of  Foreign  Afifairs  for 
1907.    It  lays  bare  the  following  facts: 

I.  That  the  various  expenditures  are  often  set  down 
in  such  fashion  d  to  conceal  the  real  object  of  the 
expenditure. 

236 


FI  NAN  CIA  I,   DISORDER 

2.  That  inaccuracy  in  deduction  and  confusion  of 
matter  are  the  rule. 

3-  That  violations  of  tlie  regulations  in  force  are 
chronic. 

4-  That  a  great  number  of  sales  made  in  the  name 
of  the  department  arc  irregular  or  fictitious. 

5.  That  waste  abcnmds.  and  that,  whereas  many  em- 
ployees are  paid  too  little,  others  benefit  by  unjusti- 
fiable generosity. 

Now  the  department  of  Foreign  Affairs  has  noth- 
mg  to  produce,  nothing  to  sell.  It  does  not  need  any 
special  eqr-nment  for  the  carrying  on  of  its  work.  It 
does  not  i.„ve  to  watch  the  market  price  of  supplies 
and  to  buy  them  under  the  best  possible  conditions. 
In  a  word,  it  does  not  have  to  do  any  of  the  things 
required  of  a  trading  enterprise,  in  seeking  openings, 
etc.  Its  stafT  is  easy  to  manage,  and  has  the  reputa- 
tion oi  being  devoted.  What  would  happen,  then,  if 
the  department  were  called  upon  to  manage  a  com- 
mercial undertaking? 

9.  All  e.xtravagant  departments  try  to  negotiate 
appropriations  in  a  more  or  le.^s  round-about  manner. 

We  have  worked  out  a  grand  naval  program,  which 
is  to  extenr'  over  a  period  from  191 2  to  January  i, 
1920.  Its  bject  is  to  add  units  to  our  fleet  and  to 
mcrease  the  facilities  of  the  ports  which  are  to  re- 
ceive them. 

The  outline  of  the  plan  includes  a  certain  Article  9 
which  authorizes  the  government  to  construct  ships 
enumerated  in  a  certain  schedule  "A"  in  such  man- 
ner as  will  insure  the  completion  of  sixteen  men-of- 

^27 


w 


HERE    ANn    WHY    Pl'HLIC    OVVN'ERSHIP    HAS    FAH.ED 


war  on  January  i,  1920.    The  two  paragraphs  read  as 
follows : 

"The  expenses  of  carrying  on  the  new  construction 
will  he  provided  for  hy  entering  the  annual  appropria- 
tions mentioned  in  schedule  TV  upon  the  hudget  for 
the  fiscal  years  if)i2-H)i(). 

"In  case  the  expenditures  of  one  fiscal  year  should  he 
greater  ihan  the  provisions  of  the  said  schedule  warrant, 
the  excess  shall  he  carried  over  hy  anticipation  to  the 
appropriations  for  the  following  year  within  a  maximum 
limit  fixed  each  year  hy  the  Finance  Law." 

The  construction  work  to  be  carried  out  between 
January  i,  19 12,  and  January  i,  19-O.  will  involve, 
according  to  the  original  plan  of  1910.  an  expenditure 
of  1.326.000  francs.  The  recent  loss  <  f  the  lAhcrte 
has  increased  the  amount  in  round  figures  to  1,400,- 
000.000  francs  ($266,000,000). 

The  government  was  anxious,  and  rightly  so,  to 
charge  these  loans  to  ordinary  expenditures.  Yet  it 
resorted  to  eating  its  corn  before  it  was  ripe,  like  Pa- 
nurge.  And  this  roundabout  method  was  finally 
adopted  by  the  Chamber  of  Deputies. 

Two  estimates  were  made,  one  indicating  the  actual 
amount  to  be  ex])ended  per  year  for  new  construction ; 
the  other  showing  the  distribution  of  the  annual  ap- 
propriations over  the  entire  period. 

The  appnjpriations  for  1912,  1913,  and  1914  were 
the  stnallest  for  the  period,  while  the  proposed  ex- 
penses were  at  their  maximum  in  1913  and  1914.  The 
two  estimates  in  detail  were  as  follows  ■ 


FlNANflAI,    niSOunKR 


1912 

1913 

1914 

1915 
I916 
1917 
1918 
1919 


Estimated 

Estimated 

Expenditures 

Apiirupnatiuns 

Fr. 

Fr. 

177.327,000 

160,000,000 

204, 1 28,000 

1 70,000,000 

229,149,000 

175,000,000 

204,439,000 

180,000,000 

180,252,000 

180,000,000 

1  S9,8oo,ooo 

180,000,000 

14.5,684.000 

l8o,0OO.0(X) 

90,934,000 

180,000,000 

1.398,713,000   1,405,000,000 


Up  to  1916  the  expenditures  exceed  the  appropria- 
tions by  139,295.000  francs  ($26,466,050),  but  the 
Navy  is  empowered  to  carry  over  the  excess  by  antici- 
pation upon  the  appropriations  of  the  following  years. 
The  sole  check  to  such  mortgaging  of  the  future  is  a 
provision  permitting  Parliament  to  fix  a  maximum 
each  year  in  the  Finance  Law. 

Thus  the  custom  of  advances  from  the  Treasury, 
which  are  to  grow  from  year  to  year,  has  been  firmly 
established.  The  Chamber  of  Deputies  has  specified, 
in  the  hope  of  decreasing  the  figure,  "that  the  excess 
shall  be  regulated  with  the  help  of  supplemental 
credits" — a  practical  application  of  the  method  of  bal- 
ancing budgets  by  means  of  supplementary  appropria- 
tions. 

Senator  Gauthier,  for  the  Finance  Committee, 
brought  forward  strong  objections  to  this  system, 
which  he  justly  described  as  a  "disguised  loan,  or  a 
loan  by  annual  installments."  He  pointed  out  all  the 
frauds  which  would  result. 

"The  system  of  anticipations  and  that  of  supplementary 
credits  superimposed  upon  it,  has  the  advantage  of  au- 

239 


H 


WHERE    AN'n    WHY    PUBI.TC    OWNERSHIP    HAS    FAILED 

thorizing  and  legalizing  expenditures  not  covered  by  the 
original  appropriations:  but  it  does  not  create  any  new 
revenue.     The  deficit  still  exists." 

Each  man-of-war  had  been  estimated  at  a  uniform 
cost  of  62,525,000  francs,  when  made  in  the  arsenals, 
and  64.000,000  francs  in  private  shipyards.  As  a 
matter  of  fact,  they  have  all  cost  exactly  the  same,  ex- 
cept tho  new  Liberie,  constructed  by  the  government, 
which  cost  72,000.000  francs.  England  and  Germany 
are  providing  battleships  of  26,000  tons.  Will  we  be 
long  content  with  only  thirteen  battles!  .ps  in  the  dock- 
yards ? 

The  minister  of  Finance  "agreed  to  insert  into  the 
Finance  Law  of  1913  clause,!  purporting  to  cover  by 
corresponding  available  resources  the  entire  amount 
of  expenditures  incurred,  which  expenses  will  thus 
appear,  at  the  end  of  the  period  o^'  construction,  as 
arranged  for  by  the  law  providing  for  the  naval  pro- 
gram." In  so  doing  he  acknowledged  the  soundness 
of  the  criticisms  of  Article  o,  made  by  the  finance  com- 
mittee of  the  Senate.  But  he  had  already  accepted 
for  himself,  and  he  has  made  the  Chamber  of  Depu- 
ties accept  his  system. 

I  cue  this  case  to  show  by  what  processes  a  depart- 
ment may  attempt  to  secure  resources  by  the  help  of 
disguised  loans.  It  tries  to  escape  from  a  unitied 
budget  by  all  sorts  oi   devious  methods. 

We  can  judge  to  what  plundering  the  general  bud- 
get would  be  handed  over  if  each  department  had  its 
own  autonomous  industrial  budget. 


«^.w 


CHAPTER  XXII 


THE   PURCHASE    PRICE 

Teleph  >nes. — The    Southern    Canal. — Swiss    Railways. — The 
Western  Railroad. — The  'Operation  Blanche." 

When  there  is  some  undertaking  to  be  purchased 
the  partisans  of  nationalization  and  municipalization 
always  start  the  ball  rolling  by  saying :  "Oh,  it  will 
cost  practically  nothing."  and  then  they  proceed  to 
reveal  their  economic  limitations  by  making  estimates 
which  are  invariably  lower  than  the  facts  w^arrant. 

When  the  French  government  decided  to  take  over 
the  telephone,  it  estimated  the  cost  at  5.000.000  francs. 
The  company  demanded  18.800  000  francs.  The  state 
was  finally  forced  to  compromise  it  9.313.000  francs, 
a  figure  which,  with  interest  and  costs  added,  ulti- 
mately increased  to  1 1,334.000  francs,  or  126  per  cent, 
more  than  the  first  estimate. 

Again,  when  the  government  determined  to  pur- 
chase the  Southern  canal,  an  outlay  generally  regarded 
as  wholly  unnecessary,  advocates  of  the  enterjirise 
were  unanimous  in  their  enthusiasm  over  the  manifest 
bargain.  "It  will  co.st  the  state  nothing."  Rut  the  ar- 
bitration commissifjn  ordered  the  state  to  pay  to  the 
Southern  company  an  annual  indemnity  of  750,000 
francs,  based  on  a  capital  o;  25,000,000  francs. 

241 


',^f 


WIIKKr.    AM'    WIIV    ITlU.n     OWNFKSIIIP    HAS    lAll.KD 


Xor  is  l^'raiico  the  >.u\y  couiUry  furnishing  ex- 
amples .-t  siuii  frauds.  Su  .t/ATland  had  sinular  ex- 
perienees  when  she  deeided  to  pnrehase  tlie  rai'ways. 
The  Federal  i^overnnicnl  appropriated  a  sum  ni  54,- 
300.000  franes  for  the  (."entral.  The  hue  actually  c.jst 
her  73.ooo.o(jo  francs,  or  20.700,000  francs   (36  per 

cent.  )   more. 

lTfty-fo;u-  million  francs  was  afterward  appropri- 
ated for  the  Xorlheastern  line;  Sj.ooo.ocx)  francs,  or 
28.000.000  francs  (51.S  per  cent.)  more,  was  the 
actual  price.  The  ori.s^nnal  appropriation  for  the 
Swiss  I'nion  was  31.700,000  franc.y.  40.000,000 
francs,  or  26.2  jjer  cent,  nujre.  was  the  final  ti,L,mre. 

An  account  of  the  government's  underestimate  (jf 
the  cost  of  the  Western  line— the  so-called  "oi)eration 
blanche"  of  M.  Barthou— has  already  been  described.^ 
The  state  had  approi)riated  in  all  220,000,000  francs 
to  cover  the  cost  of  jnirchase.  It  actually  paid  321.- 
000,000  francs  or  more  than  101,000.000  francs  over 
the  original  estimate. 
'  See  Book  2,  Ch.  8. 


OA'y 


CHAPTER  XXIII 

DELUSIONS     OF     PROFIT     AND     THE     LIFE     INSUR- 
ANCE   MONOPOLY    IN    ITALY 

I.  The  Law  of  April  4.  1912.— Lej^al  Excuse.— Delusions 
of  Profit.— Private  ("ompanies.— 'I'he  PropaKaiula.— 
Officials  as  Insurance  Brokers. — Work  for  the  Sake 
of  Service  and  Not  for  r.aiii.— Contradiction  in  Terms. 
— The  Commissions  paid  by  French  Companies.— Divi- 
dends of  Private  I'ompanies  in  France. — Probable  Ad- 
vantas^e  to  Italy. 

•2.  Provincial  and  State  Insurance. — Compulsory  Hre  In- 
surance in  Germany,  Bavaria  and  Switzerland.— In  the 
Cote-d'Or. 

I.  In  order  to  be  a.ssured  that  no  dece]  ons  would 
be  practiced  on  it,  in  buyintj  out  the  in.surance  com- 
panies, the  Italian  government  put  itself  quite  simply 
in  their  place.  The  resultin.s^  monopoly,  confirmed  by 
the  law  of  .-\pri!  4,  1912,  had  for  its  principal  object 
the  establishment  of  so-called  labor  pensions.  "The 
profits  drawn  from  this  monopoly  will  be  paid  into 
the  National  Insurance  Fund,  upon  the  books  of  which 
any  workman  engaged  in  either  industry  or  agricul- 
ture may  be  entered,  provided  he  is  not  paying  an 
annual  government  tax  exceeding  30  francs." 

The  real  excuse  for  the  bill  was  the  activity  of  the 
French  and  English  governments  in  passing  insurance 
laws.     The  Italian  government  decided  that  it  ought 


WHERE    AND   WHY    PUBLIC   OWNERSHIP    HAS    FAILED 

to  bestir  itself  along  the  same  lines.  Therefore,  in- 
stead of  taking  the  sums  necessary  for  its  pension 
scheme  from  general  budget  funds,  it  created  a  spe- 
cial fund  by  establishing  an  insurance  monopoly. 
Moreover,  by  the  destruction  of  institutions  which 
have  been  the  most  powerful  agents  in  stim'  ating 
the  spirit  of  individual  thrift,  the  government  hoped 
to  promote  a  system  of  social  thrift.  The  irreconcil- 
able contradiction  existing  between  free  and  compul- 
sory insurance  could  not  have  been  revealed  in  a  more 
striking  fashion,  and  it  is  only  necessary  to  couple 
adjectives  and  noun  in  order  to  show  the  deceptive 
character  of  all  enterprises  of  this  nature. 

But,  it  is  strange  enough  that  financiers  as  shrewd 
as  the  Italians  should  allow  themselves  to  be  deluded 
by  the  hope  that  the  insurance  monopoly  would  yield 
large  resources.  They  have  undoubtedly  been  seduced 
by  the  sight  of  the  profits  of  insurance  companies. 
But  are  such  profits  possible  under  government  ad- 
ministration ? 

In  the  first  place,  in  order  to  recruit  policyholders, 
an  active  propaganda  is  indispensable.  The  policy- 
holders of  life  insurance  companies  do  not  apply  in 
the  first  instance  to  the  companies.  They  must  be 
sought  for  diligently  and  persuaded  to  take  out  a  policy 
by  an  insurance  broker,  who  demands  a  good  and  suffi- 
cient reward  for  his  efiforts  in  bringing  about  such  in- 
vestment. What  measures  has  the  Italian  government 
taken  to  attract  policyholders? 

In  presenting  his  bill  to  the  Thamber  of  Deputies, 
the  minister  responsible  for  it  declared  that  the  Na- 
tional  Insurance  Fund  "ought  to  undertake  a  cam- 


DELUSIONS    OF    PROFIT 


paign  of  education  which  shoukl  penetrate  into  the 
farthest  and  (juietest  corners  of  Italy,  even  where  the 
ordinary  business  man  does  not  go  on  account  of  the 
iniprobnhihty  of  any  success  attending  his  efforts. 
Therefore,  the  National  Insurance  department  will  ac- 
cept as  agents  ntJtaries.  registrars,  tax  collectors,  mu- 
nicipal officials,  postmasters,  men  who  are  in  constant 
touch  with  the  people,  and  who  can  render  valuable 
services  to  insurance  by  awakening  the  desire  to  look 
out  for  the  future  needs  to  a  degree  never  before 
aroused."  In  a  word,  all  public  officials  are  to  be  ulti- 
mately transformed  into  insurance  agents. 

But.  despite  all  the  enthusiasm  that  these  amateur 
brokers  may  be  able  to  arouse,  such  cocjperation  will 
not  be  effective  unless  commissions  are  paid.  And 
then  what  becomes  of  the  all-important  excuse  for 
the  substitution  of  a  government  monopoly  for  pri- 
vate enterprise,  viz. — service  rendered  for  the  sake 
of  the  cause  and  not  for  gain? 

Now  the  average  agent  works  for  the  sake  of  gain ; 
and  the  biggest  cost  item  of  insurance  companies  is 
the  comiiiissions  of  these  same  agents;  even  the  gov- 
ernment monopoly  itself  has  preserved  them.  In  the 
case  of  sixteen  French  companies,  maintaining  fixed 
premiums,  these  expenses  amounted,  in  iQii.  to  20.- 
912.800  francs,  to  which  sum  must  be  added  16.172,- 
000  francs  of  general  expenses  and  1.202.746  francs 
in  gratuities  and  bonuses.^ 

What  will  be  the  insurance  rates  under  public  oper- 
ation?    If  the  state  wishes  to  use  persuasion,  instead 

'  Sconnmiste  Frait(ais.  July  27,    1912,  reproducing  the  annual 
table  of  the  Monitcur  des  Assurances. 

245 


WHERE    ANI'    WIIV    PUBLIC    OWMF.KSHIP    HAS    FAILED 


of  force,  it  ouRht  t<j  make  its  rates  as  oasf  as  possible 
for  the  policyholders,  but  the  profit  to  the  state  will, 
of  course,  be  just  so  much  less. 

I  have  not  at  hand  the  profits  of  the  life  insurance 
comi-anies  in  Italy,  for  i<;i  l.  hut  in  that  year  the  divi- 
dends of  the  sixteen  French  companies  just  mentioned 
reached  the  sum  of  1 5. 161.33 1  francs.  T.reat  as  has 
been  the  economic  development  of  Italv  no  on'-  will 
pretend  that  its  economic  prosperity  e(|uals  that  of 
France.  However,  if  the  Italian  monop -ly  is  as  effi- 
ciently administered  as  are  the  hVench  insuraice  com 
panics,  and.  if  it  has  as  capable  agents,  it  ms^ht  per- 
haps be  able  to  realize  half  or  two-thirds  if  the  indus- 
trial profits  of  the  I'rench  companies,  in  whicli  case  it 
would  yield  to  the  Italian  government  from  3.000,000 
to  6.000.000  lire  annually. 

Very  striking  in  this  connection  is  the  status  of  the 
old  age  pension  system  in  Fiance— a  national  under- 
taking. From  1S51  to  iS8g  the  amount  of  first  pay- 
ments was  816.323  francs,  or.  in  39  years.  20.931 
francs  a  year.  The  laws  of  July  20.  1886.  and  April  9. 
1898,  increased  the  activity  of  the  fund,  but.  even  so. 
its  usefulness  has  been  mainly  restricted  to  associa- 
tions. In  19 10  the  number  of  their  payments  approxi- 
mated 5.305.447.  amounting  to  79.982,892  francs, 
while  the  number  of  individual  payments  was  only 
82.780.  aggregating  9.900.365  francs.  In  1909  the 
private  accident  insurance  companies  had  4.856.000.- 
000  francs  on  insurance  policies,  while  the  National 
Insurance  Fund  hod  insured  for  only  77,494.000 
francs,  a  proportion  of  less  than  2  per  cent. 

246 


nELUSIONS    OF    PKOKtT 


The  •.iiatlietnatual  ro>^ervcs  and  tlic  other  funds 
availi.bic  arc  to  he  enijilnyed  as  follows  bv  the  Italian 
National   Insurance  I*"und  : 

I.  In  the  purchase  of  bonds  of  the  consolidated 
piiMir  debt  of  the  kint^dom  ot  Italy. 

J.  In  the  purchase  of  other  bonds  issued  or  ^\.n\r- 
anteed  by  the  Italian  government. 

7,  In  the  purchase  of  sdurities  issued  by  title  guar- 
antee trust  companies. 

4.  In  advances  ufjon  the  Ljuaranty  of  the  bonds 
just  described  by  numbers  i,  2.  and  3.  of  the  i)re-ent 
Article. 

5  In  the  purchase,  by  means  of  cession  and  subro- 
gation, of  annual  debts  of  the  Italian  p;overnmcnt. 

6.  In  loans  upon  national  insurance  policies  within 
the  limits  of  the  value  of  the  policy. 

7.  In  the  purchase  of  real  estate  situated  in  the 
King[dom,  on  condition  that  these  properties  be  free 
from  mortgages  and  all  other  charges  and  in  a  pro- 
portion not  to  exceed  a  tenth  of  the  reserve. 

8.  In  subsidies  to  employees  and  workmen  of  the 
state,  provinces,  and  municipalities;  public  and  phi- 
lanthropic institutions;  pawnshops;  chambers  of  com- 
merce and  banks,  on  a  guaranty  of  the  cession  of  a 
share  in  the  profits  due  them. 

Where  is  the  state  which  can  guarantee  that  its 
income  will  constitute  a  perfectly  sound  investment 
when  Rnglish  consols  are  at  74  shillings?  The 
Italian  revenue  is  susceptible  to  sudden  changes  which 
make  predictions  difficult  for  both  the  monopoly  and 
its  policyholders.     The  government  will  have  to  as- 

2^ 


H 


WMKRi:    AND    VVIIV    rMIBI.IC    OWNKRSHIF'    HAS    KAILKI) 


i 


iVJE'^j. 


sunic  all  responsibilities  and  the  investments  directed 
by  clause  No.  8  will  he  very  difficult  of  execution. 

The  Fund  enjoys  prix  iKij;cs  which  assure  it  of  cer- 
tain resources,  hut  only  to  the  dctrinient  of  other  gov- 
ernment uii(lertakinj,'s.  l-"or  example,  it  has  free  use 
of  the  po>tal  and  telegraph  services.  Both  these  serv- 
ices thus  lose  revenues  which  private  insurance  compa- 
nies would  have  yielded  them. 

Finally,  the  profits  of  the  monopoly  are  exempt 
from  the  income  tax,  which  private  companies  would 
have  to  pay. 

The  officials  who  are  to  act  as  insurance  agents 
have  their  own  duties  to  fulfill.  I  nahle  to  devote 
more  than  their  idle  moments  to  the  new  task,  they 
will  always  be  working  at  a  disadvantage.  Nor  is 
every  man  fitted  !)y  nature  for  the  role  of  insurance 
agent.  Not  only  is  the  taste  for  it  lacking,  hut  skill, 
tact,  and  technical  ability  will  be  wanting. 

Possibly  the  officials  will  gather  some  personal  bene- 
fit by  reason  of  the  added  authority  which  their  new 
position  gives  them.  They  may.  perhaps,  be  able  to 
obtain  by  main  force  policies  which  ordinary  agents 
are  not  able  to  get.  But,  successful  insurance  is  not 
only  a  question  of  affixing  a  signature,  nor  even  of 
the  first  payment  on  a  policy.  A  policyholder  must 
persevere.  What  if  he  slips  back  after  the  agent  has 
received  his  commission? 

This  is  a  risk  which  al!  insurance  companies  know. 
The  state  will  also  discover  it,  but  it  will  find  itself 
placed  in  a  still  more  difficult  position  by  the  necessity 
of  refusing  contracts  brought  in  by  its  officials  and 
employees.      It    will  be    forced   to  choose   its  policy- 


.o 


DELUSIONS    OF    PROKIT 


holders,  t  icct-pt  some  and  refuse  others,  and  in- 
surance exiics.  branded  with  a  sort  of  discredit,  if  not 
infamy,  will  thus  be  created. 

Italy  and  Irufjuay  are  the  only  countries  which 
h.ivc  cxiHTimcntfd  with  national  life  insurance  The 
mdcpciKleiicf  of  llic  National  Insurance  I'und  of  I  'ru- 
.^u.-iy  is  ^^reater  than  that  of  Italy.  It  was  established 
by  a  law  of  December  26,  191 1,  and  is,  therefore,  too 
recent  to  furnish  any  authoritative  data. 

Systems  of  state  fire  insurance  are  found  in  other 
countries.  In  Germany  public  fire  insurance  associa- 
tions "have  always  been  energetically  supported  by 
the  government."  '  Landei'  proprietors  are  compelled 
to  insure  their  ])roperty  with  public  offices  in  Bavaria, 
Wiirttemburg,  and  the  grand  duchies  fiaden  and 
Hesse.  Private  insurance  enterprises  are  limited  to 
personal  property  and  to  risks  on  real  property  not  in- 
sured by  the  state. 

Nevertheless,  it  has  not  been  found  either  possible 
or  advisable  to  oust  the  private  companies,  as  is  proved 
by  the  following  table,  giving  the  insurance  situation 
in  Germany  in  1906: 

SJ  Public         ^  B     ^  3J 

Fir-  Insurance      cJz'^™,  Com- 

Awociations        »«:>et>e«  panie* 

Receipts  :  Millions  of  Marks 

Assessments,  or  gross  premiums         78.343         36,094       190,347 
Miscel.  returns   73.66o         33.935        107,134 

Expenses : 
Indemnities  and  taxes 51,708         10,294         90,291 

Miscellaneous  expenses: 
Contributions  to  fire  companies 
and  amortization 16,094  S,i  14         34,389 

^  Annales  dt  la  Regie  Directe,  April,  191 1. 

249 


i 


wherp:  and  why  puri.ic  ownekshii'  has  i-aileu 

The  Municipal  Fire  Insurance  l""un(l  of  Rostock  has 
reinsured  with  a  private  company  the  total  caj)ital  in- 
sured by  itself.  It  is,  therefore,  nothiiii:^  more  than 
an  agency  for  the  collection  of  jiremiunis  and  the  dis- 
trihution  of  indemnities.^ 

The  canton  of  W'aaJ  has  insured  both  real  and  per- 
sonal property  since  1849;  insurance  is  compulsory. 
Personal  jiroperty  insurance  is  unknown  in  any  other 
canton,-  but  national  insurance  of  personal  property 
is  about  to  be  established  in  Switzerland. 

In  the  insurance  system  in  operation  in  the  canton 
of  W'aad  the  cost  of  administration  was  13  francs  48 
in  1907;  in  (ilarus,  from  1895  to  1905.  9  francs  34 
per  100,  and  in  1907.  13  francs  48. 

The  state  must  accept  all  risks,  the  bad  with  the 
good. 

December  20.  1907.  the  French  minister  of  the  In- 
terior announced  that  he  would  not  oppose  the  crea- 
tion of  a  departmental  fire  insurance  fund  in  the  dis- 
trict of  the  Cotc-d'Or.  The  fund  was  therefore  es- 
tablished, January  i.  with  an  annual  subsidy  of  15,000 
francs  from  the  (leneral  Council,  and  with  a  central 
bureau  installed  in  the  prefecture. 

A  clause  limited  the  insurance  premium  to  10 
francs ;  but  this  clause,  consider  i  "as  a  slight  anti- 
collectivist  barrier,"  has  disappeared.  The  advan- 
tages extolled  are :  The  annual  policy ;  the  oppor- 
tunity of  insuring  one's  self  at  the  town  hall  of  one's 
own  town;  "following  a  disaster  an  appraisal  of  dam- 

'.4««a/fJ  de  la  Ri'f^ie  directe.  April,  1911,  page  169. 
^Ibid-.  December,   190Q,  page  47. 

250 


H 


I 


DELl'SION'S    OF-     PKOFIT 

ajT^es  devoid  of  any  spirit  of  (|nil)l)ling  or  harter."  The 
policylioldcr  is  always  free  lo  withdraw  or  to  mofhfy 
his  pohcy. 

No  hargainin^:  ample  satisfaction!  Under  certain 
circumstances  insurance  may  well  become  an  oppor- 
tunity for  profit  in  a  sense  never  inlended. 

Here  are  evidently  advantages  beyond  those  offered 
by  private  companies — at  the  expense  of  the  taxpay- 
ers in  the  first  place.  Ten  years  hence  the  actual  re- 
sults may  be  known 

Two  French  deputies,   MM.   Cartier  and  Coudere, 
have  each  introduced  a  bill,  estal)lishing  a  state  mo- 
lopoly    on   every    species   of    insurance.      Both    have 
been  reported  favorably  by  P.risson. 

In  the  case  of  the  fifty-four  most  important  French 
insurance  companies,  with  fixed  premiums,  life,  fire, 
etc.,  the  ijrofits  art  estimated  at  31,000.000  francs. 
After  deducting  reserve  anrl  sinking  funds,  a  net  i)rofit 
of  25,000.000  or  j6.ooo,ooo  francs  r?mains.  Let  us 
suppose  that,  with,  the  hel])  of  first-class  investments, 
the  state  can  obtain  a  net  amount  greater  than  this 
profit  and  etjual  to  the  total  dividends  distributed  by 
the  companies,  or.  in  other  words,  35,000,000  francs. 

Unless  the  state  confiscates  it  will  have  to  pay  the 
companies  between  i  .000.000.000  and  1,500,000.- 
000  francs,  in  order  to  buy  them  out.  which  sum, 
at  3  per  cent.,  represents  an  annual  interest  of  from 
30.000.000  to  45,000.000  francs.  Then  add  to  this 
amoimt  a  sinking  fund  of  about  10.000.000  francs. 
We  have  thus  an  asset  of  35.ocx),ooo  francs,  with  lia- 
bilities of  40.000.000  to  55.000.000  francs.     The  bal- 

251 


J. 


WHERE    AND    WHY    PUBI.H;    OWNERSHIP    HAS    FAILED 

ance  of  this  operation  is  a  deficit  of  5,000,000  to  20,- 
000.000  francs. 

But  how  will  it  be  if  the  state  system  operate  with 
less  favorable  results  than  private  companies — an  al- 
most certain  ci.ntingency  ?  The  losses  might  well 
reach  30,000.000  or  even  40.000.000  francs.' 

' /I>r  Monopoly  d'Etat.  Rapport  au  Congres  de  Chambre  de 
Commerce,  by  M.  de  Lasteyrie. 


asa 


tit 


CHAPTER  XXIV 

THE    FISCAL    MINES    OF    THE    SAAR    DISTRICT 
The    Prussian    Government    Mines. — Decrease    of    Profits. 

Not  only  railways,  but  all  other  state  undertakings 
are  exposed  to  commercial  risks.  Their  profits  do  not 
always  increase,  as  is  proved  by  the  fiscal  mines  be- 
longing to  the  Prussian  government.  The  following 
tables  show  the  ucCL-ase  in  the  aggregate  in  the  ac- 
counted profits  of  Prussian  mining  undertakings: 


YeM 

i8qo 
1891 
i8q2 

1893 
1894 
1905 

1906 

1907 
1908 
1909 

Average 
1890- 1894 
1895-1899 
1900- 1904 
1905-1909 


Reported 

Profits 

Marks 

24,.4  64,000 

17,112,000 
13,829.000 
15,084,000 
15.024.000 
30,65 1 ,000 
27,444.000 
14,622,000 
16,136,000 
17,000,000 

17,102,600 
27,302,552 
34,846.403 
21,170,600 


Number  of 
'Vorkmen 


36  175 

57.939 
57.307 
55.3^2 
57.009 
84,244 
89,130 
92.776 

96,845 
101,941 

52,810 

64,37s 
77.462 
92.987 


Profit  per 

Capita 

Marks        pf. 


433 
395 
241 
272 
263 
363 
307 
157 
166 
166 

321 
424 
449 
232 


19 
36 

M 

66 

55 
84 
92 
61 
62 
76 

22 

05 
8S 
55 


The  enormous  falling  oflF  after  1905  is  readily  seen; 
the  decrease  per  workman  is  48  per  cent.,  compared 
with  the  previous  period. 

253 


WIIFKK    AM)    WHY    V^'H    IC   ()\\  NEUSHI P    HAS    FAILED 

A  similar  decrease  is  to  be  noticed  in  all  the  niinint; 
enterprises  cxce])l  that  of  salt. 

i8g<)             IQ06  IQO7             1908  1909 

Thous.inds  m  Marks 
Minintr        tindcrt.ikiiin'; 

cx((|it    -nit    -'O.415      20.()i<7  K,058      10,921  11,290 

Mct.-illiiri;icril    works    ..     i,0(;o       4.245  1.982          882  31 

Saltworks    i.74'J          ('^^  .^-''O        ^.W^  03' 

'llierm.il   cstablishmtiUs        34.7         35. 1         31  <J          .'^  5       '".i 

Total     23,297.7  2S.()T,5-i  i^■^4      1=      8.516,4771 

The  decrease  in  the  profits  in  jjovernmeiit  11  ling 
ventures  is  due,  above  all,  to  the  coal  mines  of  the 
Saar  district. 

The    toUowinc:   triennial   tables    show   t;  •   changes 

which  have  taken  place  since  1900  in  the  cost  and  the 

selling  price  per  ton  of  the  coal  from  these  mines: 

Cost  per  ton  in  marks 
Charges 
Years  Salary         ^qu.p-     ^f...h<-^      ^axcs         Total- 

Workmen 

IQOO    4-74  ><'4  0.44  0.12  1.43 

1903     4  8q  1.57  0.52  o.iS  182 

I90()     5  -'^>  '74  055  0.16  1.78 

1909    5  5-'  ^  I'  074  oiQ  2.13 

Sellins  price  and  profits 

Prirp  Expense         rv,-,»ii»»» 

Years  Actually  for  New        ^p?,^fit  Total  < 

Realized         Installation         '^'^'"'^ 

1900 10.68     0.14     2.76     2.90 

1903 10. (w     0.22     1.48     1.70 

1906 10  40     0.28     1.36     1.64 

1900 11.03      0.58      0.59       1.17 

The  net  cost   has   increased   48  per   cent,   and  the 

profits  liavc  decreased  f,o  per  cent.     The  budc^et  es- 

'  Translator's  Note — I  have  been  unable  to  verify  these  fig- 
ures, which  appear  to  be  incorrect. 


THE    FISCAL    W    VES    OF    THE    SANK    DIS'RICT 

t^blished  by  the  Prussian  Departmttit  of  Mines,  Foun- 
dries, and  Salt  Works,  has  been  worked  out  on  new 
principles,  '^uch  as  a  distinction  between  the  costs  of 
Tdministrai.on  and  the  expenses  of  ojieration,  reserves 
tor  new  installations,  current  expenses,  etc.  Miscel- 
laneous expenses,  figuring  heretofore  in  the  general 
budget  o»'  the  Prussian  government,  although  really 
concerning  financial  operations,  have  been  carried 
over  to  the  budget  of  the  Department  of  Mines,  Foun 
dries,  and  Salt  W'ork^.  Hence,  there  is  a  decrease  ot 
8,859,177  marks  in  the  preliminary  estimate  of  th-j 
net  profit  as  compared  with  the  inidget  01  1911.^ 

The  gross  profit  upon  Prussian  fiscal  mining  enter- 
prises was  estimated  for  1912  at  18.215,000  francs: 
the  net  profit  at  5,938,000  francs.  It  should  be  ex- 
plained, however,  that  a  certain  amount  had  been  pre- 
viously deducted  for  the  Academy  of  Mines  at  Berlin, 
as  well  as  for  the  Geological  I   stitute. 

'  Circuiaire  du  Lotnite  Houillcres,  February  10,  1912. 


255 


CHAPTER  XXV 


PUBLIC  VERSUS  PRIVATE  ENTERPRISE 


1.  A    Priori    Reasoning  Contradicted   by    Facts. 

2.  The    National    Printing    Office    and    the    Paul    Dupont 

Printing  Company. 

3.  Xaval  Construction. 

4.  Two    Piers. — The    Telephone    Company    and    the    Post- 

ohice. 

5.  Indemnities    for   Losses   Upon    State  and   Private   Rail- 

way Systems. 

6.  Pul)]ic  and  Private  RlectricrU   Plants  in  Germany. 

7.  Other    Results  in   Ciermany. 

8.  The  .Municipal  Public  Service  of  Paris. — M.  Dausset. — 

Superiority    of    Private    Enterprises. — Benjamin    Wel- 
ton. — r\sychology  of  the  .Middleman. 

9.  Reaction  ,\gainst   State   Undertakings  in   New  Zealand. 
10.  Letter    of    a    C"itizcn    of    Manchester. — Conduct    c(    In- 
dustry and  Its  Regulation. 

1.  The  partisans  i)f  socializing  and  of  rnunicipal- 
izing  all  sorts  of  public  services  never  tire  of  the  old 
refrain  that  state  and  mtniicipalities  manage  enter- 
prises for  the  good  of  the  service,  and  not  for  profit, 
and  that,  therefore,  we  ought  to  get  them  at  a  lower 
cost.  IVc  ought  to.  flere  we  have  a  priori  reason- 
ing. The  uo'.'ie  is  that  su  n  reasoning  is  constantly 
contradicted  by  the  facts. 

2.  Some  years  ago  the  net  profit  on  the  National 
Printing    Otifice    of    I'Tance    apparently    represented 

256 


m 


PUBLIC  TersHs  pruate  intkr prise 


nearly  normal  interest  on  the  capital  invested  How- 
ever, an  investip;ation  gave  M.  Colson  an  opporttmitv 
of  declaring  that  this  result  was  only  obtained  by  an 
"exorbitant"  increase  in  the  prices  demanded.  In 
proof  of  his  statement  M.  Colson  gave  the  following 
significant  example  : 

The  Paul  Dupont  Company  had  arranged  to  fur- 
nish the  Navy  with  forms  and  designs  at  the  same  cost 
as  the  National  Printing  Office,  less  the  expenses  of 
composition,  correction  and  holding  of  forms.  The 
National  Printing  Office  maintained  that  the  Du{X)nt 
Company  was  woikmg  at  a  loss  in  t)rder  to  ruin  the 
credit  of  the  government  establishment.  An  inspec- 
tor of  finances  (inspertcur  dcs  finances)  declared,  offi- 
cially, that  this  assertion  was  false,  and  that  the  Du- 
pont Company  both  could  and  did  make  a  profit  on 
the  business,  despite  the  reduction  granted  to  the 
Navy.' 

3.  On  December  13,  191 1,  the  Assistant  Secretary 
of  the  United  States  Navy,  Mr.  Watt,  told  a  com- 
mittee of  the  House  of  Representatives  that  the  bat- 
tleship Florida,  constructed  by  the  government,  cost 
per  ton  (hull  and  engines  only),  1,374  francs  50 
($265.28);  while  the  Utah,  constructed  by  a  private 
company,  cost  904  francs  ($174.47).  In  19 10  Con- 
gress authorized  the  construction  of  two  battleships, 
the  cost  of  which  it  limited  to  30,000.000  francs  ($5,- 
700,000).  The  private  company  did  its  work  accord- 
ing to  contract  at  a  cost  of  500,000  francs  less  than 
the  original  e  iimates;  the  navy  yard  rer|uired  addi- 

^  Communication  j  I'Acadimie  des  Sricnces  Moralfs  et  Fch- 
tiques,  August,   1912. 


VVin-.kK    A.\l»    UUV     I'lIIlI.lC    OVVNKKSIIII'     HAS    lAII.KD 

tional  ajjpropriatiotis  until  the  actual  cost  reached  over 
35,ocx),()oo  francs   ( $(),65().ocx)). 

I  read  in  the  Army  and  i\'az'y  Journal,  January  J8, 
i()i  I  : 

"The  Committee  on  Naval  AlTairs  recommends,  also. 
that  ("onpress  give  to  Secretary  Meyer  the  power  to  con- 
struct in  a  private  shipyard  the  battle,  hij)  \ civ  York,  the 
huildinp  of  which  was  authorized  durintj  the  last  session  ; 
the  secretary  having  shown  that  it  will  cost  tlie  govern- 
ment at  least  eight  millions  and  a  half  more  to  const. net 
the  Nnv  York  in  the  P.rooklyn  Navy  N'ard  by  reason  of 
the  eight-hour  law." 

It  is  only  in  Trance  that  the  Navy  constructs  more 
ships  than  it  '>ands  over  to  private  companies  for  con- 
struction, as  the  following  table  shows  (  iQii)  : 

I)F,EH  Se.*  Vessels  Tokpedo  Boats 

Countries  C^Z^..         Navy  Yard  ^^-;;;„      Navy  Yard 

France, 

Tons     7.3.400  « 3.6,34  15.944  n.35H 

Proportion    per 

cent 47  53  .SS  42 

England, 

Tons    J88.100  231,830  92,0^  2,400 

Proportion    per 

cent 63  37  97  3 

Germany, 

Tons   320,562  7S,i£4  46,200 

Proportion    per 

cent 81  19  100 

United  States, 

Tons   184,075  48,82f,  ^7,200 

Proportion    per 

cent 79  21  roo 

4.  In  the  cities  of  I'ortsmouth  and  Southsea  there 
are  two  piers :     The  one  is  ])rivate  property,  the  other 

258 


I'l'iiLK'  :'rrMis   I'ki\  \ik  i:.\  ri:Ki'K:.si. 

the  property  <>i  the  city.      The  first  is  a  success;  the 
second  a  "white  elephant."  ' 

Faithful  Beg^g.  one  of  the  best-known  authorities 
on  business  cnnditi(nis  in  luigland,  declared  before  the 
London  Chamber  of  Commerce,  on  the  :.Sth  day  of 
May,  191 1  :  "The  National  Telephone  Company  op- 
erates on  58  per  cent,  of  its  gross  revenue,  while  the 
I'ostotirtce  operates  on  74  per  cent.  The  Postotlfice 
earns  3.5  per  cent,  on  the  capital  invested,  and  the 
National  Telephone  Company  is  earning  8.9  per  cent." 

5.  On  the  Western  (state)  railway  of  France,  from 
1904  to  1908,  claims  foi  loss,  damage,  and  delay 
amounted  to  1.566  francs  per  100,000  francs  of  gross 
receipts.  From  1909  to  191 1  this  proportion  reached 
3.043  francs.  On  the  old  state  system  the  proportion 
was  1,426.  Since  1909  this  sum  has  increased  to 
2,055  francs,  which  proves  that  the  Department  of 
State  Railways,  while  extending  its  lines,  has  not  im- 
proved them.  On  the  Est,  Midi.  Nord.  and  Paris- 
Lyon-Mediterranee— all  privately  owned  lines— the 
average  is  1.175  francs.  Thus  the  claims  on  the 
Western  are  157  per  cent,  higher,  and  on  the  two 
other  state  systems  75  per  cent,  higher  than  on  the 
private  lines. 

I  might  add  that  the  Western  has  fallen  back  on  the 
plea  of  "circumstances  over  which  we  have  no  con- 
trol," floods,  strikes,  etc..  a  subterfuge  to  which  the 
private  companies  have  not  found  it  necessary  to  have 
recourse. 


'  Truth,  April  26,  191 1. 


259 


WHI'.RK     WD    WllV    I'Lltl.U;    (JU  N  IKS  II 1 1'    HAS    lAU.I.l) 


6.  A  (aTinan  cn^iiietT,  \\  ilht'lin  Majerczik,  has 
puhlislicil  a  (.iiiuparativc  stud)  nt  the  results  accniu- 
plishi'd  rt'spcctivfly  by  nuiniciiial  and  private  electrical 
enterprises  in  (iermany. 

We  borrow  the  following  facts  from  tht  ana.,  sis 
of  his  study  published  in  the  Revue  pA-ono))iiiiiic  Inter- 
nationale, of  July  i5,  191 2.  The  figures  were  taken 
from  the  latest  available  statistics.' 

In  his  survey  Her.  Majerczik  has  jjassed  over  the 
Berlin  and  Hamburg  plants,  operated  by  private  com- 
panies, as  their  prosperity  so  tar  exceeds  the  average 
that  his  compari-^ons  would  have  been  unduly  affected 
by  them.  Moreover,  his  study  bears  only  upon  elec- 
trical plants  supplying  localities  with  a  population  of 
at  least  100,000  inhabitants.  These  installations  num- 
ber fifty-six,  and  are  subdivided  as  follows: 


Muricipal 
Hants 


Priv.-ite 
Plants 


Number    

Population  in  territory  supplied 


41  15 

Q.571,000        3,j6j,ooo 


(The  information  given  relates  only  to  fourteen  of 
the  private  plants  in  (piestion,  data'as  to  the  fifteenth 
not  being  attainable. ) 

The  situation  of  the  private  plants  is  actually  less 
favorable  to  develojiment  than  that  of  the  public 
plants.  Yet,  out  of  thirty-eight  municipal  undertak- 
ings, twenty  supply  only  a  single  locality.  The  extent 
of  territory  supplied  by  private  enterprises  is  double 
that  of  municipal  enterprises. 

'  Statistik  dcr  I'cycinijiung  der  FJchtricitcitS'ucrkr  fiir  das 
Bctncbjahr,  i(xx>,  DortmuiKl,,  igio,  supplcminted  by  the  Statistik 
dcr  f.leklri:itiitszvrrkc  in  Pcutschlaitd  nach  don  Stand,  vom 
April  I,  igio.     (i.  Dettmar,  Berlin,   1910. 

260 


f'i'Bi.rc  rrrsus   fRivvi  i;   km  erprisk 

llu-  municipal  enterprises  are  the  nUk-r  ■  for  in  the 
t'c'KHining,  such  undertakings  were  considered  the  spe- 
cial i)rerogative  <>i  l..cal  governments. 

Municipal  Oi'eraiimn 
Avrrag* 


1  Average  numbpi    .f 

inhabitants  in  re- 
gion supplied  per 
plant    

2  Ntimlier  of  suburbs 

supplied  per  plant 
J    Average    area    per 

plant    in    km ' 
4    Average    age    (per 

plant  per  year)  .  . 


234.000 

92 
O2.4 
13   I 


Number] 
uf  Flanti 


41 

J8 

JO 

40 


PRIVaTF    OPKRATION 

Number 


Average 

240,000 
37  2 
148.6 
11. I 


of  Plant! 

'4 
'S 

8 

15 


The  superiority  of  the  e(|uipment  of  private  enter- 
prises IS  demonstrated  by  the  tact  that  the  average 
productive  capacity  ,)f  municipal  plants  is  scarcely 
three-fourths  that  of  private  plants. 


5    Number  of  boilers 

per    plant    

6.  Ma.ximum  pressure 

kilogram    per    sq. 

cm 

7    Heating        surface 

per   boiler    

8.  Number    of    prime 

movers  per  plant 

0  Ma.ximum      power 

per    machine    kw. 
10.  Average  total   ca- 
pacity of  accumu- 
lators kw 

1  f    Distribution: 

Entire  system. 
Overhead  .... 
Underground. . 


Municipal  Operation 
Average 


15-5 


Number 
of  Plants 

37 


Private  Opera  tion 
Average 


Numt)er 
jf  Planu 


13  6 


14 


II. 7 

37 

13.6 

14 

226 

37 

266 

'4 

8.2 

36 

9.6 

9 

350 

36 

988 

9 

8,000 


34 


10,500 


14 


489 

41 

517 

II 

57 

41 

281 

II 

432 

41 

2J6 

II 

261 


li.L 


MICROCOPY    RESOLUTION    TEST    CHART 

ANSI  and  ISO  TEST  CHART  No    7 


1.0 


I.I 


145 

ISO 


1 2.8 

!r  13.6 


III  2.5 

II  2.2 

2.0 
1.8 


1.25 


1.4 


1.6 


A     APPLIED  IM/IGE 


1653   Eosl    Wain   Strr.et 
f'ochester.    New   York         14609 
(716)    482  -  O.'IO  -  Phone 
(716)    288-  5989  -  c-ix 


USA 


WHKRK   AN.)   WHY    P     BLIC   OWNERSHIP    HAS    FAILED 

The  fewer  boilers  of  the  private  plants  are  of  a 
Jrl  economical  type  tnan  those  of  V^^^^f^^^'^^^ 
the  prime  movers  are  more  powerful  (Nos.  ,  to  ioh 

In  comparing  Hght  and  power  crcmts  we  have  55^3 
kw.  per  I  ooo  inhabitants  for  33  Puobc  pl^^^^'  f^f  79 
kw    for  II   private  plants.     If  traction  be  added  we 
hL  65.9  kw.  for  the  f^rst.  80.9  kw.  for  the  second 
Municipal    plants    furnish    power    for    traction    to    . 
greater  extent  than  private  plants,  because  the  great 

OPERATING   RESULTS 

MCS,C.P^.    P;..STS  P..V..B  Pt-X^^^ 

Average  .^"pTa'^'i;         A^"'*'         °' P'-» 

18.  Energy    produced 

wh ...''.'''.  """'  «°86        34  O.X03        .1 

iq.  Energy  produced 
in  per  cent,  of 
the  total  capa- 
city,     multiplied 

by    8.760    hours.  ^^  „ 

percent '7-0  J^ 

20.  Average    time    of 

use       of       total 

power    of   plant.  ^^^  ^^ 

hours    «.J»/-'" 

21.  Annual  loss  of  en- 

ergy in  per  cent. 

of     the     energy  ,0 

produced    20.3  35  ^^ 

22.  Energy    furnished  ^^  g 

per   inhabitant    .  Q.i  Ji 

23.  Private      lighting  ^  ^^  g 

kwh 

24.  Public       lighting.  ^  ^^  ^3^  8 

kwh.    ^  o  ,5  ^  g 

25.  Power.  W^;;h  ^7.4  ^8  36.^ 

26   Traction,  kwh.    ..  1^4  ^  ^ 

27.  Total,  kwh 37-°  J 


PUBLIC  z^ersus  private  enterprise 

municipal  undertakings  control  all  the  important  tram- 
way systems. 

Private  enterprises  are  operated  more  economically 
than   municipal   undertakings. 

They  can  produce  greater  power  per  heat  unit  be- 
cause they  employ  boilers  and  engines  of  greater  unit 
capacity  and  the  agent  of  supply  is  better;  that  is  to 
say.  with  a  given  apparatus,  they  are  called  upon  to 
produce  more.  Their  losses  are  creater,  because  they 
operate  as  central  stations  at  long  ilistances.  Private 
central  stations  furnish  30  per  cent,  more  energy  for 
private  lighting,  and  60  per  cent,  more  for  public 
lighting  per  inhabitant.  They  also  sell  much  more 
energy  for  power. 

The  financial  results  are  as  follows: 

The  installation  costs,  on  the  average,  are  1.160 
marks  per  kw.,  for  municipal  plants,  and  1.240 
marks  for  private  plants.  The  private  plants  operat- 
ing at  long  distances  have  a  more  expensive  system 
of  high  tension  lines  and  transforming  stations. 
Nevertheless,  they  can  furnish  i  kwh.  28  per  mark  of 
cost  of  installation,  while  municipal  plants  can  only 
furnish  i  kwh.  12.  They  also  content  themselves 
with  lower  rates. 

The  following  table  gives  the  difference  in  rates 
between  municipal  and  private  plants : 

RECEIPTS  PER  KWH   SUPPLIED 

MuNiciPAi.  Plants    Private  Plants 
Pfennigs  Pfennigs 

Light    3t>.8  316 

Power    15-7  12-5 

Traction 9-95  9-12 

263 


WHERE   AND    WHY    PUBLIC    OWNERSHIP    HAS    EAILED 

For  light  the  average  rate  charged  by  private  com- 
panies is  14  per  cent,  less  than  that  of  nuinicipal 
plants;  for  power,  20  per  cent.  Kven  for  traction  there 
is  a  difference  of  about  8.3  per  cent,  in  favor  of 
private  plants. 

The  superiority  of  private  plants  is  shown  above 
all  in  the  matter  of  expenditures. 

EXPENSES  PER   KWH  SUPPLIED 

Municipal  Operation     Private  Operation 

Pfennigs  Pfennigs 

Fuel    2,-(^  2.Q8 

Oil     0-'.3  009 

Wages  and  salaries   ...  2.04  2.15 

Maintenance     0.97  0.96 

Miscellaneous    i-i?  1-74 

Total    7-90  7-80 

Gross     difference,     per 

cent 13-2  9-5 

The  expenses  for  fuel,  oil  and  maintenance  are  less 
for  private  plants,  because  these  plants  are  better 
equipped  and  better  managed.  Yet  the  labor  expenses 
are  higher.  The  miscellaneous  expenses  are  also 
higher,  because  private  plants  are  subject  to  local  taxa- 
tion from  which  municipal  plants  are  exempt.  If 
taxes  were  taken  into  consideration  the  gross  differ- 
ence between  expenditures  and  receipts,  which  is  13. J 
per  cent,  for  municipal  and  9.5  per  cent,  for  private 
])lants,  would  be  materially  modified.  The  differences 
would  be  reversed  if  private  plants  did  not  have  lower 

rates. 

H.  Marchand.  in  a  summary  of  the  work  of  Herr 
Majerczik.  concludes  that,  from  every  point  of  view, 
public    ownership   and    operation    of    the    generating 


PUBLIC    I'CrSllS    PRIVATE    ENTERPRISE 

forces  of  electricity  can  only  be  carried  on  at  a  disad- 
vantage. 

7.  In  the  Journal  dcs  Pcbats  and  in  the  (iconomlste 
Fraitcais  Arthur  Raffalnvich  has  asserted  that  jnibhc 
ownership  and  i>neration  in  (iernianv  lias  been  by  no 
means  so  sncce^sfnl  as  enthnsiastic  partisans  of  gov- 
ernment ownersliip  in  [-"ranee  and  elsewhere  have  trie  1 
to  make  us  believe.  Several  municipal  enterprises  have 
recently  been  li(inidated  and  a  number  of  electrical 
plants  and  tramways  sold  outright. 

Recent  reports  of  the  Burgomasters  of  Strassburg 
and  Rheydt  affirm  that  the  operation  of  great  indus- 
tries by  municiiial  authority  is  encountering  numerous 
difficulties;  that  it  is  lacking  in  tlexibility;  that  it  is 
exceedingly  hard  to  find  competent  managers ;  that  the 
influences  brought  to  bear  are  frequently  far  from  dis- 
interested, and  often  conflicting;  that  the  majority  of 
the  municipal  councillors  have  no  comprehension  of 
industrial  (ir  commercial  business ;  that  real  profits 
are  rare.  In  1908,  out  of  36  municipal  tramways, 
only  9  were  o])r'ating  without  loss,  while  11  were  re- 
quiring rather  heavy  appropriations. 

The  burgomasters  charge  that  cities  which  are  sup- 
plying directly  their  own  gas,  electricity,  and  tram- 
ways are  being  delivered  over  without  let  or  hin- 
drance to  the  ringleaders  of  the  various  labor  associa- 
tions. 

In  Germany  to-day  there  is  a  very  marked  evolu- 
tion in  the  direction  of  private  management,  the  city 
retaining  the  ownershij)  of  the  enterprise,  but  leasing 
t!ie   operation   to   a   corporation.      Cologne    has   con- 


I'ili 


WIIKRI".    AM)    \VIl\'    IMBLU:    <  )\V  \  KRSI 1 1 1'    HAS    FAILED 

tractcd  with  a  private  company  to  supply  the  extra 
elcctricitv  needed,  and  the  city  has  alho  promised  not 
to  enlar<;e  its  electrical  plants. 

8.  In  his  report  (jn  the  municipal  lni(lsj;et  of  Paris, 
for  19 1-'.  M.  Dausset  acknowledges  the  superiority 
of  private  enterprise  over  public  adniiristration  in  the 
following  terms : 

"It  may  as  well  be  confessed  that  a  special  mechanical 
equipment  or  a  skilled  staff  is  only  to  be  obtained  by 
applying  to  a  private  company." 

The  business  man  keeps  in  touch  with  the  latest  de- 
velopments and  spares  no  efforts  to  select  his  mar- 
kets under  the  best  possible  conditions.  Public  man- 
agement, "even  in  those  rare  cases  where  it  ventures 
to  take  the  initiative  and  pcjint  out  to  the  council  the 
necessary  improvements  and  repairs,  is  obliged  to  wait 
several  months,  if  not  .several  years,  to  obtain  the 
money  or  the  indispensable  authority." 

The  same  conditions  prevail  in  the  case  of  street 
cleaning.  The  City  of  Paris  is  unable,  with  its  limited 
annual  resources,  scarcely  sufiicient  for  current  ex- 
penses, to  1)ring  about  a  rapid  renewal  of  out-of-date 
efjuipment.  The  contractor,  on  the  contrary,  has  at 
his  disposal  for  such  a  purpose  capital  that  he  can 
pay  ofY  at  his  leisure,  and  which  nermits  him.  more- 
over, to  offer  attractive  terms.  Finally,  being  careful 
to  reduce  the  cost  of  maintenance  to  a  minimum,  the 
contractor  enters  only  after  careful  consideration  into 
initial  expenditures.  His  chief  reliance  is  in  a  first- 
class  equipment. 

266 


PUBLIC    cU'rSHS    PRIVATE    KNTERPRISF. 

M.  Dausset  continues : 

"The  contract  system  is  equally  well  suited  to  the  pav- 
ing and  asphaltin<:j  of  the  streets,  and  their  maintenance. 

"Here  again  evcrythitig  depends  upon  the  quality  of 
the  material  emi)loyed  and  on  the  process  and  the  care  in 
manufacture,  as  ut-ll  as  on  the  way  the  work  is  per- 
formed. Taking  into  account  llie  importance  ot  tlie 
streets  and  the  traffic  they  will  be  called  upon  to  hear. 
the  contractor  would  know  how  to  make  the  necessary 
distinctions  and  would  not  hesitate,  for  example,  to  in- 
crease by  a  centimeter  the  thickness  of  the  asphalt  bed 
demanded  by  the  specifications,  if  the  street  were  much 
frequented,  in  or'ler  to  escape  expensive  repairs  in  the 
near  future,  and  to  lessen  thus  the  annual  cost  of  main- 
tenance. 

"In  the  same  way.  in  the  case  of  construction  and 
maintenance  of  cobbled  roads,  the  government,  ill 
equipped  and  lacking  the  flexibility  indispensable  for 
performing  such  work  rapidly  and  economically  by  profit- 
ing by  the  experience  ot  each  day.  has  every  interest  in 
leaving  such  work  to  private  industry,  while  reserving 
for  itself  the  equally  important  and  delicate  task  of  con- 
trol." 

In  his  investigation  of  the  efficiency  of  municipal 
work  Benjamin  Welton  also  shows  the  superiority  of 
the  business  man  over  the  public  official.^ 


"The  problem  that  he  has  to  solve  is  simple,  and  he 
considers  it  as  a  whole.  He  is  not  hampered  by  all  sorts 
of  restrictions.  He  seeks  the  most  competent  men,  dis- 
charges the  incapable,  and  is  able  to  give  bonuses  for 

'  E/Kciency  tn  City  iinvernment.  page   ni. 

—  V 


WHKRE    AND    WHY    I'L'ULIC    OU\i:K>llii'    ll.\.S    lAIf.KD 

increase  of  production.  His  rule  is  to  compare  expendi- 
tures and  results.  He  does  not  hesitate  to  make  neces- 
sary expenses  which  will  he  economy  in  the  long  run. 
He  orj^'anizes  his  units  in  such  a  manner  that  they  give 
the  maximum  income.  Above  all,  it  is  impossible  to 
falsify  his  reports  because  they  are  veritieil  by  the  party 
with  whom  he  is  under  contract." 

9.  The  Socialists  wmild  have  us  believe  that  from 
the  nidiiient  a  gnvernnient  or  a  municipality  engages 
in  the  nationalization  or  the  municii)alization  of  public 
utilities  it  perseveres  in  the  tmdertaking. 

^'et  we  have  seen  that  stich  undertakings  have  been 
abanddned  in  Great  Britain  and  Germany,  while,  as 
for  New  Zealand.  Mr.  Scholefield,  in  1909,  and 
Messrs.  Le  Rossignol  and  Stewart,  in  1912,  are 
united  in  the  onviction  that: 

"Of  late  years  the  whole  tendency  has  been  to  leave 
more  and  more  to  private  enterprise.  It  is  a  swing  of 
the  pendulum.  Ten  years  ago  the  government  would 
not  have  dared  to  suggest  allowing  private  companies  to 
develop  the  great  assets  latent  in  the  energy  of  the  rivers 
of  New  Zealand.  To-day  it  is  the  avowed  policy  of  the 
state  to  encourage  private  enterprise  in  this  direction. 
It  is  highly  improbaltle  now  that  New  Zealand  will  make 
any  further  pronounced  advance  toward  State  Socialism 
until  a  new  temper  succeeds  to  the  present  mood  of  con- 
servative  Liberalism." 


The  New  Zealanders  are  not  theorists,  but  a  certain 
number  are  sufficiently  shrewd  to  perceive  that,  when 
a  loss  is  resulting  from  a  state  enterprise,  it  afifects 
the  whole  nation.     In  other  words,  that  the  govern- 

^00 


Puui.K-  rcrsits   pkivaii:   i;\Ti:Ki'i<ist: 

iiuiit  in  piirsiiini,'-  smli  a  policy  is  forcini^  some  iiidi- 
\i(luals  to  help  to  bear  the  financial  burdens  of  others. 

lo.   J.   C.    B,    IVrry.   in  a  letter  to  the  Manchester 
City  Xi'ws,  of  .March  4,  i()i  i,  said: 

"If  pas  were  bcint,'  furnished  by  a  private  company 
it  would  have  to  have  a  hij;li  illuminating-  power.  We 
cannot  force  the  gas  committee  to  _i,dve  it,  and  it  does  not 
j?ive  it.  If  the  tramways  i)elonged  to  a  comp'any  they 
would  not  l)e  permitted  to  monopolize  the  streets  in  the 
center  of  the  city  to  the  detriment  of  all  otiier  sj)ecies  of 
transportation.  Dur  market  committee  is  losing  on  its  re- 
frigerating plants,  while  a  competing  company  is  a  com- 
mercial success  and  is  giving  'cheap  food'." 

When  political  or  administrative  bodies,  whether 
states  or  municipalities,  operate,  they  are  regulating 
themselves.  This  is  a  sufbcient  reason  in  itself  for  the 
suppression  of  all  public  trading  oi)erations,  because 
it  is  necessary  that  there  be  a  distinct  separation  be- 
tween the  forces  of  operation  and  regulation. 

ludustriil  operation  is  inherently  adapted  to  private 
enterprise.  Industrial  control  is  the  correspondinii 
function  of  states  and  municipalities. 


BOOK    III 
ADMINISTRATIVE    RESULTS 


chafti:r  I 

ADMINISTRATIVE   RESULTS 

l-riends  of  socialization  and  municipalization,  han- 
dicapped by  the  financial  results  of  the  various  forms 
of  government  ownership  publicly  advcjcated  by  them, 
have  recently  made  a  change  of  front.  All  right,  they 
say,  publicly  owned  utilities  do  not  bring  in  profits; 
but  to  compare  public  administration  with  private  is 
to  do  the  former  an  injustice,  hs  aim  is  not  profit 
but  service.  It  sacrifices  financial  results  to  adminis- 
trative results  in  the  interest  of  the  moral  and  material 
progress  of  the  nation. 

These  theorists,  in  regard  to  "administrative  re- 
sults," forget  that  nothing  is  free,  that  everything 
must  be  paid  for,  and  that  public  services  are  by  no 
means  the  cheapest. 

However,  looking  at  the  matter  from  their  stand- 
point, let  us  examine  the  administrative  results  of  di- 
rect operation  by  the  state  and  the  municipality  and 
see  in  how  far  their  statements  are  borne  out  by  the 
facts. 


ClIAPTKR    II 

THF.   SAFFTY  (iF    I  RAVia.FRS   I   POX   STATF   AND 
i'Kl\Ai;i    RAILWAY    LINES 

The  Safety  of  Travelers  aiul  tlie  State  System  —  The  Re- 
port of  All)ert  I'liomas. — Loinparibuns. —  The  Minutes 
of  the   I'reiieh  Senate. 

In  a  nnmlicr  nf  artit'le-,  iJiihlislud  in  the  rhinciLs 
dc  la  Ri'tjir  I'nwti-,  Mtlt^Mrd  Milliaud  has  tried  to 
prcne  that  sal'cty  is  ahsnhitc  iii)iin  t,'n\  erniiieiil  rail- 
wav  systems  ami  precari()ii>  in  the  extreme  upon  pri- 
vately nianai,a'd  systems. 

The  budget  eommission  of  I()I2  entrusted  to  Albert 
Thomas,  a  inited  Socialist,  the  compilation  of  a  re- 
port on  the  budget  of  public  iuilit\'  franchises.  He  de- 
clares himself  that  "his  rei)ort  is  completely  Dermc- 
ated  by  Socialist  thought"  :  ami  he  winds  up  by  recom- 
niendin<:^  the  purchase  of  those  hVench  railways  still 
in  private  h.-mds. 

As  he  could  not  bolster  tip  his  arc^ument  with  the 
results  of  the  Western  railway,  since  a  number  of 
accidents  unfortun.'itely  interfered  with  such  a  possi- 
bility, he  jjasses  it  over,  and  s|)eaks  onlv  of  the  old 
state  system.  His  argument  is  not  lackim:  in  courage, 
because  the  following  facts,  among  others  collected  by 
(Tiarles  Macler  and  com])letely  contradicting  it,  had 
already  appeared  in  the  Journal  dcs  Economistes: 


THE   SAJ'KTV    Ol      I  KAVELERS 

"P.asiii^  lii-  aij^'iinKiits  upon  tl  r  statistical  studies  of 
KilganI  Milliaiid,  M.  Tliom  is  tnaiiitaiiis  tlie  bold  thtorv 
that  safety  is  assured  only  on  railways  o})eratcd  by  \hc 
state.  The  argument  of  MM.  Milhaud  and  Thomas  is 
rather  naive.  riiere  are  more  actidciits  upon  the  rail- 
ways of  the  I  nited  States  th.\n  upon  those  of  the  i'.el 
gian  line;  there  are  more  upon  the  luiglish  lompany 
system  than  tipon  that  of  the  Prussian  government  sys- 
tem :  there  were  more  aecidents  upon  the  Swiss  railways 
l)efore  than  after  the  purchase:  consciiuoitly,  there  are 
mere  accidents  in  France  upon  the  systems  oi)eraled  hy 
private  companies  than  upon  the  state  system.  'However 
surprisuuj  this  declaration  »iay  appear  to  ma>i\','  says 
M.  Thomas,  'the  fart  is  scientifically  established:  Sur- 
prising, in  tact,  especially  just  after  the  catastrophes  of 
Villepreux.  Courville,  Bcrnay,  Ponts-de-Ce,  Saujon, 
Montreuil-Pjella,)-.  As  to  whether  the  theory  is  scien- 
tifically established,  let  us  see : 

"In  the  first  place,  if  we  compare  the  railway  acci- 
dents upon  the  systems  operated  by  private  companies 
with  our  old  government  system  (we  pass  over  the 
Western  system,  as  M.  Thomas  has  done),  we  declare 
that,  according  to  the  statistics  of  the  ministry  of  Public 
Works,  the  total  average  number  of  passengers  killed 
and  injured  from  1905  to  1909  was: 


Passengers  Killed  and  Injured 

Government 
Systems 

Per  million  carried    i .  58 

Per  million   p.T^sen^er   kilometer.s  0.03 

Per   million    train    kilometers....  2.0/ 


'  Pnvate 
Systems 

0.70 

O.OJ 

1.46 


"In  whatever  manner  we  exainine  the  statistics,  tiic 
average  number  of  victims  of  accidents  resulting  from 
traffic  upon  the  old  government  system,  the  so-called 
uiodel  system,  is  noticeably  higher  than  upon  the  private 


-/J 


WHKRK    AND    WHY    I'L'iiLU:    0\V  N  KKSHl  I'     HAS    FAIL.KU 


systems.  The  precedinq'  period,  that  is  to  say,  1(^1-1905, 
pivcs  precisely  tlie  same  results.  If  we  consider  sep- 
arately the  iiunilier  of  the  killed  and  injured,  the  results 
in  the  ease  of  each  cf  the  ahove  items  are  disadvantage- 
ous to  the  state. 

"When  we  pass  on  to  a  comparison  of  accidents  be- 
tween the  French  systems  as  jirivately  operated  and  the 
j)rincipal  for'.-ign  <.;^overnnient  systems,  we  discover  that 
the  victims  of  accidents  have  been  much  less  numerous 
upon  the  first  than  upon  the  second.  We  borrow  our 
figures  from  the  latest  statistics,  those  of  tlie  year  190Q. 

"First,  let  us  take  Belgium.  Here  are  the  figures  pre- 
sented by  the  report  of  lielgian  railway  operations  com- 
])ared  with  the  statistics  of  the  Ministry  of  F^ublic  Works 
in  France: 

Belk'ian  French 

Guvernment       Companies 

Per  million    passen-^Kilktl    0.03  o.oi 

gers  carried   injured J. 67  0.46 

Per   million    pa.ssen-^Killed    0.0015  0.0005 

ger  kilomiters  ...injured 0.12  o.oi 

"The  superiority  of  the  French  companies  is  incon- 
testably  shown. 

"Let  us  take  Germany.  The  following  figures  are 
taken  from  the  .Innnairc  Statistiquc  pour  I'llmpire  Alle- 
mand.  published  by  the  Imperial  Statistical  l)ureau : 

Germany        ,,  ^""'^'^ 
'         Companies 

Per   million   passen-^Killed    o.oH  o.oi 

gers  carried    injured 0.38  0.46 

Per    million    passen-^  Killed     0.003  0.0005 

ger  kilometers   ...JInjured o.oiti  o.oi 

■'The  advantage  is  again  on  the  side  of  the  French 
cumpanies. 

274 


THE    SAFETY    OF    TRAVELERS 

"Let  US  take  Austria.  Hero  arc  the  figures  taken  from 
the  report  of  the  operation  of  the  Austrian  government 
railways,  published  by  the   Ministry  of  Railways: 

Austria  ^  French 

Companies 

Per    million    passen-^Killed    ....  o.oi 

gers  carried    /Injured 225  0.46 

Per   million    pas^en-^  Killed     ....  0.OOO5 

ger  kilometers   .../Injured 0,07  o.oi 

"Here,  again,  the  advantage  is  altogether  on  the  side 
of  the  French  companies,  in  so  far,  at  least,  as  the  num- 
ber of  injured  is  concerned. 

"Now  Hungary.  Here  are  the  figures  drawn  from  the 
Statistics  of  Hungarian  railways,  published  by  the  min- 
istry of  Railroads : 

Hungary        r^"""^ 
Companies 

Per   million    passen-JKilled    0.23  o.oi 

gers  carried   /Injured i.oi  0.46 

Per   million    passen-^Kilied    0.007  0.0005 

ger  kilometers  .../Injured 0.03  o.oi 

"Once  more  the  advantage  is  with  the  French  compa- 
nies. 

"Let  us  take  Switzerland.  The  figures  are  taken  from 
the  statistics  of  Swiss  railways,  published  by  tlu'  Federal 
PostoflSce  and  Railway  department : 

Switzerland        French 
Companies 

Per   million    passen-^Killed    0.13  0.01 

gers  carried   /Injured 0.74  0.46 

Per   million   passen-^Killed    0.008  0.0005 

ger  kilometers  .../Injured 0.03  0.01 

"In  all  cases  the  advantage  is  with  the  French  compa- 
nies. It  may  be  said  positively  that  the  safety  of  pas- 
sengers is  much  greater  upon  the  systems  of  the  French 

^75 


\vhi:rk  and  whv  plbi-ic  ownership  has  failed 


companies  than  upon  those  of  the  I->ench,  Belgian, 
German,  Austrian,  Hungarian,  or  Swiss  state  Unes.  This 
conclusion  is  again  home  out  hy  the  figures  regarding  ac- 
cidents ot  all  kinds  per  too  km.  operated.  While  the 
figure  is  .^.8i  for  the  French  private  lines,  it  is  5.9  for 
(lermany,  10. 1  for  Italy,  12.5  for  Austria,  and  50  for 
Switzerland. 

"Nor  is  this  all.  If  we  compare  the  statistics  of  acci- 
dents in  those  foreign  countries  where  puhlic  and  private 
operation  exist  concurrently,  we  find  that  accidents  are 
more  numerous   upon   the  state-owned   systems. 

"In  Austria  and  in  Switzerland  the  accident  statistics 
of  private  lines  are  not  given  separately,  hut  a  compari- 
son hetween  the  figure  for  accidents  upon  the  government 
systems  considered  alone  and  ui)oii  the  whole  railway 
system  of  each  country  makes  clear  the  measure  in  which 
this  last  figure  is  intluenced  hy  results  on  private  imes. 
The  number  of  accidents  resulting  from  traffic  on  all  the 
lines  together  is  smaller  than  that  of  the  accidents  upon 
the  state  systems  alone,  which  proves  that  accidents  are 
much  less  numerous  upon  private  systems  than  upon 
government  lines.     Here  are  the  figures: 

Per  Million  Passengers  Carried 

Austria  Switzirland 

Government        Pederal        Fedtral  and 
Government  and  Ra.iwivc         Company 

C"mpanu-s        railways         Railways 

Killed o  13  o.ii 

Injured     -'.^'5  •   '>'^  0.74  0.72 

Pit  MiUiun   Passenger  Kilometers 

Killed    ■••■  0.008  0009 

Injured     0.07  o.o<)  0036  0.036 

■'Finally,  let  us  take  the  statistics  of  the  victims  of 
accidents,  including  both  passengers  and  employees.  The 
question  of  the  safety  of  operation  is  well  w  -th  examin- 
ing from  this  point  of  view. 


THE    SAFETY    OF    TRAVELERS 

"W'v  find  that  the  whole  number  of  killed  and  injured 
per  nidlion  train  kilometers  is  4.4,,  on  tiie  IVench  pri- 
vately operated  systems,  as  against  \^.^  on  tlie  Belj^ian 
government  system;  y.(,  upon  the  Austrian  government 
system;  S,  i  upon  the  Hungarian  government  system; 
40.1  upon  the  Sui-  railways  (  -  upon  the  Swiss  compa- 
nies) ;  5.10  ui)(jn  the  (ierman  railways;  and  3J.4  upon 
the   Italian  raihvavs. 

"After  having  .een  these  figures  our  readers  will  tlnd 
the  contention  of  All)ert  Thomas  still  more  surprising. 
In  all  the  luiropean  countries  that  we  have  passed  in 
review,  safety  is  greater  upon  the  private  lines  than 
upon  those  of  the  government.  It  is  a  fact  established  by 
ofTlicial  statistics." 


On  August   1,  ]ijnj.  the  accident  on  the  I' 


took  plm-e.   result iiiy    I'rdin  tin 
of  the 


)\-ernnicnt  (jf  niv 


)nts-de-Ce 
lisregard  on  the  part 


order  ot    i,<i)i    for  th 


e  an- 


nua! uispeclioii  of  steel  bridge^ 
th 


his  accident  caused 
e   death   of   ;,(j   passengers.      In     \ugust,    1910,    the 


accident  at  S 
the  death  of  .;o  | 


uijoii.  near  Bordeaux,  occurred,  causing 
ssengers.     On  June   18,   1910,  came 


the  accident  at  \'illei)reu\.  upon  the  Western  rail 


when  iS  death 


wav. 


were  reported;  and,  on  September  JO, 


1910.  the  accident  at    Bernay.   when  there   were  al 


ath; 


-dim; 


so 


<■  our\ille,   wh 

family  and   ten   other  deatl 


try   14,    191  [.  occurred  the  accident  at 
tch  caused  the  destruction  of  an  entire 


IS. 


he  six  greatest  railway  accidents  that  France  h 


sultcred  dm  ing  live 


as 


\"e 


ars  h 


:ive  thus  all  occurred  on  the 


government   system:  three  on  the  West 


on   the 


old 


operated  during  nearl 


ern.  and  three 
government    system,   which   the   state   has 


\e 


ars,  and  which  has  only 


^77 


WHERE   AND   Wr{Y    PUBLIC   OWNERSHIP    HAS    FAILED 

2,292  kilometers  (1,433  miles),  making  the  line  about 
fifth  in  size  of  the  important  systems  of  France. 

On  November  24,  1911,  the  accident  at  Montreuil- 
Bellay  inspired  a  discussion  in  the  Senate,  which  re- 
sulted in  the  following  resolution  : 

"The  Senate  proffers  the  assurance  of  its  profound 
sympathy  to  the  victims  of  the  catastrophe  at  IMontreuil- 
Bellay  and  its  congratulations  to  the  rescuers,  and,  after 
taking  cognizance  of  the  declarations  of  the  minister  of 
Public  Works  that  efforts  are  being  made  to  improve  the 
deplorable  condition  of  the  Western  line  and  expressing 
its  confidence  in  the  ability  of  the  government  to  put  an 
end  to  the  insecurity  and  also  to  the  irregularity  of  rail- 
way operation,  lays  the  resolution  on  the  table." 

Thus  the  Senate,  with  the  approbation  of  the  min- 
istry, solemnly  affirmed  "the  deplorable  situation,  in- 
security, and  irregularity  in  the  operation  of  the  Wes- 
tern," apropos  of  an  accident  which  occurred  on  the 
old  state  system. 

The  Journal  Officiel,  of  July  12.  contains  the  fol- 
lowing question,  put  by  M.  Engerand,  deputy,  to  Jean 
Dupuy,  minister  of  Public  Works : 

"What  is  the  number  of  engines,  coaches  and  freight 
cars  destroyed  or  damaged  in  accidents  which  have  hap- 
pened upon  the  Western  railway  from  January  i,  1909, 
to  March  i,  191 2?" 

He  receiveci  the  following  answer : 

"68  engines;  30  tenders;  198  coaches;  and  451  freight 
cars." 

278 


THE    SAFETY    OF    TRAVELERS 

If  the  Socialists  cannot  cite  the  financial  results  of 
the  state  system  as  an  argument  in  favor  of  the  na- 
tionalization of  the  railways,  the  ill  digested  state- 
ments of  Edgard  IMilhaud  and  Albert  Thcjuias.  regard- 
ing the  security  they  ofifer,  will  certainly  not  convince 
anyone. 


279 


CHAPTER    III 
DISORDERS,    DF.LAYS    AND    ERRORS 

Telephones.— ']"hc  Report  of  Marcel  Scinhat.— The  Office 
ill  the  Rue  (iuteiiheri;. — Motues  Diclatiiii;;  the  Choice  of 
the  Site. — Consequences. — The  ("oniniission  of  1900- 
1905. — ",\   Wise   Delay." — M.   Steeg. 

The  Adnimistration  of  the  Telctrraph. — Technical  and 
Operating,'  .Services. — Maintenance. —  I'hc  l'ndcr.t:^round 
Sy.steni  of  Paris. — The  Lost  and  I'ound  ('aide. —  The 
National  Printint^  Office  .Vgain. —  I  ack  of  I-'oresis^ht  of 
the  Tolacco  Monopoly. — Construction  of  Government 
Buildintrs  in  Paris. — Misinformation. —  The  French 
Minister  of  Agriculture.— The  Xaval  Iiitellipencc  De- 
partment.—  increase  of  State  Functions  Increases  Diffi- 
culty of  (  ontrol. 


In  his  character  of  Socialist  Marcel  Seinbar  wishes 
the  state  to  take  over  all  public  utilities,  ^'et.  as  re- 
porter of  the  biidjzct  (T  th('  postoffice,  telegraph  and 
telephone  systems,  included  in  the  general  budget  of 
i(jo6,  he  has  demonstrated  very  clearly  what  becomes 
of  a  trading  enterjirise  in  the  hands  of  the  state. 

When  the  tele])hone  tirst  ajipeared  in  b" ranee  the 
government,  considering  that  it  would  be  hazardous  to 
attempt  its  operation,  granted  to  private  interests  the 
authority  to  take  upon  themselves  this  experiment  at 
their  own  risk,  reserving,  however,  the  right  of  buving 
back  the  powers  thus  granted,  together  with  the  prop- 

280 


DISt^RDERS,    nia.AVS    AND    1  KRORS 

erty  acainiulatcd.  for  a  ccimpensation  to  be  agreed 
upcin.  In  iXSo  the  Sucictc  Licncrali'  drs  Telephones 
was  inc(iri)nratc(l,  1lie  franchise  granted  would  have 
come  to  an  end  Septeniher  S.  1SS4.  but  it  was  extended 
for  a  furtlicr  period  ot  five  years. 

On  lulv  I  -'.  iSSj,  the  gDvernnient  obtained  an  ap- 
propriation I  if  _'5(),ooo  francs  to  establish  lines  at 
I\lieinis.  K.'ubaix.  I'nurcing.  Troyes.  Xancy,  etc., 
where  the  Societe  ( lenerale  des  Telephones  was  not 
operating,  .\tler  snnie  ninnths  of  operation  the  gov- 
ernment dr'clared  that  it  was  realizing  jirotits  at  a  rate 
50  per  cent,  lower  than  that  of  the  conii)any.  Septem- 
ber 8,  1S80.  that  is  to  say  the  date  of  the  expiration 
of  the  franchise,  the  government  established  the  tele- 
phone monopoly. 

The  purchase  of  the  company's  etpiipment  had  been 
authorized  by  the  law  of  July  16.  1889.  The  govern- 
ment offered  5.068.836  francs,  but  by  an  order  dated 
May,  1896,  the  Council  of  State  rendered  judgment, 
ordering  the  government  to  pay  9.313,000  francs, 
which,  with  interest,  ultmiately  increased  to  ii,334.- 
338  francs,  or  126  per  cent,  more  than  the  original 
estimate. 

M.  Sembat  says : 

"In  replacing  private  enterprise  the  state  had  no  inten- 
tion of  borrowing  its  methods.  This  was  announced  in 
the  very  beginning.  The  first  act  of  the  government  fur- 
nished a  joyful  augury  for  the  future.  It  lowered  the 
rates  on  subscribers"  contracts.  It  was  impossible  to 
know  whether  the  government  was  going  to  sell  service 
at  a  loss.  It  fixed  its  rate  at  a  ventu.:.  The  desire  was 
to  confer  a  boon  rather  than  to  launch  a  great  industry." 

281 


WUKRK  .\Ni>  wrn    niiiK    ownkrsihi'   has  failed 

Thus  in  the  very  l)r<,Mniiincj  the  actual  price  of  the 
piircha^-c  exceeded  the  estimate  by  ij6  per  cent.,  and 
rates  were  "fixed  at  a  venture." 

As  a  matter  df  lact.  the  extension  of  time  granted 
the  Snciele  ( n'nerale  des  Telephones  had  been  far  too 
short.  \()  industry  can  establish  itself  and  pav  off  its 
ca])ital  in  live  years.  Therefore,  when  the  go\ernment 
replaced  the  company,  tiie  hitter's  e(|uipment  was  be- 
hind the  times.  In  certain  cases  the  intervention  of 
four  operators  was  necessary  to  brin.t,^  about  one  con- 
nection. In  America  and  in  several  I^elgian  cities  Mul- 
tiple switchboards,  so  named  because  the  terminal 
point  of  all  subscribers'  lines  wired  to  the  same  ex- 
change is  repeated  before  each  o])erator.  were  already 
in  use.  .\  single  cm])ioyec  sufficed  to  connect  two  sub- 
scribers on  the  same  switchboard.  'I'he  1-rench  depart- 
ment had  experimented  with  this  system  at  the  Wag- 
ram  exchange. 

"But,"  says  M.  Stceg.  in  his  report  on  the  budget  of 
11907.  "despite  the  promised  advantages,  for  want  of 
money,  time  a:i(!  ..pace,  the  first  installations  of  this  new 
type  have  been  greatly  limited.  [Resides,  the  work  has 
been  done  rather  under  the  pressure  of  immediate  needs 
than  in  the  execution  of  a  comprehensive  plan." 

Other  difficulties  also  arose.  The  operators  were 
unprepared  for  the  new  system.  The  plan  of  calling 
subscribers  by  number,  as  required  by  the  multiple 
switchboard,  instead  of  calling  them  by  name,  as  was 
the  custom  under  the  old  system,  bothered  the  opera- 
tors. It  was  finally  decided  to  decrease  the  number 
of  exchanges  and  to  establish  three  large  ones  on  the 
right  bank  of  the  Seine. 

282 


DISORDKKS.    DKI-AYS    AND    FRRORS 


Now  a  business  man  under  cxistinp;  conditions  would 
have  sonj^ht  the  most  commodions  site  in  order  to 
estahhsh  his  |)riiKi|)al  exchange,  i'.ut  nd  so  the  jjov- 
crnment.  The  cotncnience  nt'  the  chief  tele|)hone  ex- 
chanj^^e  was  suhordinatcd  ti.  the  needs  of  the  Postoffi  c. 
Altlioui^jh  ((instructed  only  tv-n  years  liefore.  the  Post- 
oi'lice  l)uil(hnj,^  was  completely  outfjrown.  The  officials 
did  not  know  where  to  keep  the  mail  wagons.  The 
opportnnit\-  atTorded  1)\  the  establishment  nf  the  new 
exchange  was  too  good  to  he  lost.  The  F-iue  de  r,uten- 
herg — a  short  thoroughfare— wps  condemned  and 
closed,  and  a  telephone  building  following  the  line  of 
the  curb  constructed.  The  lower  tloor  of  the  new 
building,  however,  was  given  over  as  a  shelter  for  the 
mail  wagons. 

And  here  is  another  curious  pf)int !  The  Telephone 
department  had  been  anxious  to  do  away  with  the  'ild 
widely  scattered  exchanges.  But,  after  these  had  been 
concentrated  in  the  same  building,  connections  were 
made  by  the  same  methods  as  had  prevailed  when  the 
ofifices   were   situated   in   different   buildings. 

.•\s  a  consequence,  anfl  since  it  was  necessary  to 
carry  interurban  service  lines  and  the  lines  of  three 
bureaus  into  the  same  place,  the  department  was  forceil 
to  enlarge  the  conduit  which  runs  from  the  Rue  du 
I.ouvre  to  the  Rue  Richer  through  the  Rue  Mont- 
martre,  at  great  expense  and  in  unusual  proportions. 
Finally  "  a  special  conduit  is  now  required  in  the  Rue 
Etienne-Marcel,  already  over  encumbered,  the  present 
ducts  being  incapable  of  containing  the  too  numerous 
cables  that  must  pass  in  this  direction." 

The  defects  of  such  service  are  easily  seen.     Con- 

283 


Win-.KK    AM)    WHY     Pini  I(     (.\VMK>I!I1>     HAS    FAILED 


cc-iitration  in  ihc  same  luiildirif^  of  hiircaus  to  nil  in- 
tents aiitl  ptirp.i^c's  separate  has  made  necessary  the 
rclcicati'.n  .if  a  va^t  uv.i-.-.  ,.f  wir^s  invoivini,'  in  its 
turn  .itluT  imrlcrtakini^'v  ,,n  aii  iiiinece-sanlv  va^  scale. 
As  the  whole  system,  the  verv  foundations  of  whieh 
are  fal.se.  may  have  t  i  Ik  renewed  many  tunes,  it 
onirht  surely  to  he  renoiirued. 

ill  \')'>'>  a  eomnnsMoti  wa-  appointed  to  outline  a 
.i^eneral  course  of  acti(.n.  !i  (lisc,,..,-d  ih,-  .piesn,  n  un- 
til too;.  Thaf  year  two  s\\  itchl,,  .ard-.  ^ach  for  ^.ooo 
suhscnher^.  were  placed  in  the  (  intcnheri,^  e\-chani;e. 
.'  ''^■>'  '^'''^''  ""'  ready  to  u-e  in  K;.);.  The  switchl.o.-n-d 
lor  5,000  siihM-nljer-;.  >ul)se(pienll\-  ordered  lor  the 
Pas.sy  exchange.  h;i^  not  vet  heen  installed,  as  is  the 
ca^e  also  with  several  other  switchhoards  ordeied  for 
a  mimher  of  other  exch  111-^.^.  Considerahle  sums 
liave  heen  spent.  They  ha\e  remained  uni)roduciive. 
and  ilie  suh^crihers  .are  >till  wa;tin:^^ 

'11  ]i)of)  a  contr.actor  made  the  dei)artmeiit  ;i  propo- 
sition to  replace  the  eiuire  aiiparatu-  of  ilu'  l';iri^  sys- 
tem hv  the  common  h.attery  system,  .adopted  h\  ;iM  the 
.i;reat  .\merican  compam'es,  for  jo. 000,000  fiancs 
'$3,800,0001.  \  committee  (.n  telephone  e(|uii)ment 
was  ap])ointed  f,  .r  the  purp<,se  of  exanu'nin-  into  this 
;  ropo^iiinii,  '•which  i;<  contract  t'<.rm."  saidM.  Steeg, 
"'•au.sed  to  he  instantly  rejected."  .M.  .Siee.i,^  mentions 
the  rejection  as  self-ex])laiiatory.  [  confess  that  I  do 
not  understand  hx  pMim  of  view.  In  the  intercut  of 
the  state,  whenever  it  i>  possible,  nccessarv  work 
.should  be  done  hy  a  contractor.  Such  a  proceedini^ 
would  ensure  a  triple  adv:mta,-c  vi/.  :  a  dehmte  limi^ 
!o  the  sum.-  to  he  appropri.ited,  control  on  the  part  of 

9S1 


niSORIilU-.     nil  A^S    ANI>    I  RKORS 

the  state,  insKad  (if  exorbitant  expense  anil  ahnses  of 
()[)eratinn  and,  finally,  respnnsihilitv  oi  the  enntractur. 

However,  the  eonitnittee.  owinix  ehietiv  tn  the  per- 
sistence of  M  Dennery,  state  eni^niK-er.  wlio  h.id  vcen 
the  comnioti  l);ittery  system  workin;^  in  the  ( 'niti'd 
States,  ultimately  eoneliided  to  adopt  it.  The  nece--- 
sary  ex])eii'-e  •>{  e(|nippiiii,j  the  Paris  svstem,  1,'eneral 
and  pri\ate  e -ahani^es,  was  estimated  at  4,000.000 
francs  ( '^j(in,i  lOo ) . 

At  last  the  Telephone  rlepartment  liad  a  definite 
j)lan  of  action.  P>u{  no  proof  of  an\-  sj)irit  of  initia- 
tive had  been  1,'iven  :  f"r  it  wa-  only  introdncins,'  a  svs- 
Uin  alreafly  employed  for  several  ycar>  hy  private 
C(jmpanies  in  the   I 'm'ted  States. 

But,  at  any  rate,  the  new  pro<^ram  is  at  least  to  he 
carried  ont  expedition.-!)  ?  M.  Steeij  answers  skepti- 
cally: "We  dare  not  promise  it."  After  which  he 
proceeds  to  j.,Mld  the  pill  with  the  following'  j2;linvin;j[ 
rhetoric:  "Like  scientific  discoveries,  indnstrial  im- 
provements may  at  an\  moment  overtnrn  all  esti- 
mates. Therefore  i  department  mnst  not  anticipate 
the   future  too  lioldly." 

M.  Steeg  may  he  reassured !  The  department  need 
never  be  afraid  of  anticipating^  the  future.  It  is  al- 
ready ton  far  behind  the  limes  for  that!  Meaiuvhilc 
telephone  subscribers  are  l)et^j:[in,<;  the  department  to 
contpier  their  fear  of  too  boldly  anticipatin.s,'  future 
l)rogress  at  least  long  enough  to  give  them  a  reasona- 
bly speedy  connection  when  they  have  summoned  the 
courage  to  ask  for  one. 

The  fire  at  the  (nttenberg  exchange  gave  the  de- 

285 


^      ♦ 


win  km:  am.  vvkn    ithik    hu  mksiup   has  failed 

partnicnt    .nxitlu'i     iinicli  needed    excuse    for    making 
haste  slouK. 

l()-(lay  we  .ire  enjuyins^  in  Cans  the  common  bat- 
tery system.  I  wo  snl.MTihers.  connected  on  different 
exchanges,  cii:  lie  comiected  in  less  than  thirty  sec- 
onds. We  never  coniplam.  however,  if  we  succeed 
in  getting  our  [larty  uitliin  three  minutes,  a  certain 
proof  tliat  the  frenchman  is  the  easiest  man  in  the 
world  to  govern. 

Speaking  of  the  Telegraph  Department,  M.  Dah- 
mier  says :' 

"Tlie  French  government  wears  itself  out  in  sterile 
investigations.  When  one  has  had  some  httlc  contact 
with  tile  ninny-sided  maciiinery  of  this  comi)licatc(l  sys- 
tem, he  is  struck  by  the  lack  of  cooperation  among  the 
various  departments.  l="or  example,  a  very  marked  dual- 
ity is  evident  between  the  technical  and  operating  services. 
Althougii  tlieoretically  united  under  the  same  manage- 
ment, each  is  conducted  like  an  autonomous  department. 

■'The  technical  service  aj)pears  to  have  made  it  a  ruie. 
a  point  of  honor,  in  fact,  to  ignore  the  needs  of  the 
operating  service.  Apparatus  is  furnished  which  renders 
effective  service  very  difficult  and  prevents  the  carrying- 
out  of  important  changes.  With  more  up-to-date  equip- 
ment, from  a  practical  point  of  view,  possibly  a  flat  rate 
system  of  subscribers'  schedules  might  already  have  been 
attempted  in  certain  cities." 

In  the  eighteenth  century  Voltaire  reproached  the 
French  government  with  not  occupying  itself  suf- 
ficiently with  the  question  of  the  conservation  of  its 

'  Report  on  the  budget  of  1912. 

286 


DISORKKR^.    1)1  I  AYS     VND    I  RRORS 


resources. 


If  we  may  jud^i-  by  the  l.illnwiiii;  pa^-a^e. 


also   from  the  repi 


irt  n(    M.   Dahmier,  tins  ha<l  habit 


has  r.ot  vet  been  overcome 


be.1 


that  ih 


\n(\  urban  sys- 


riveu 

s 


/e  can  uear  witness;  mat  me  nndergrou 
tern  of  I'aris  is  in  a  deplorable  coiichliun.  U  is  ., 
neither  supervision  nor  nictho(hcal  altentuJii.  Repair 
are  made  in  haste  and  without  proper  oversight.  The  cur- 
rents passing  througli  electrical  conductors  are  inter- 
cepted in  the  passage  and  diverted  from  their  cables 
without  any  plan  and  without  technical  precautions. 
Then  the  cables  themselves  are  punctured,  perforated, 
and  crushed  in  the  conduits  without  any  attention  being 
paid  to  the  matter.  Kntire  cables  have  l)een  altandoned. 
Certain  cables  have  been  dug  up  or  have  disappeared 
under  rubbish  without  any  one  having  any  recollection 
of  their  being  there.  In  this  particular  service  negligence 
has  reached  incredible  proportions  " 

M.  Dalirr.ier  then  ([uotes  a  memorandum  of  the 
department,  and  concludes : 

"To  sum  up,  it  is  acknowledged  that  the  lines  <ire  in- 
spected only  when  they  cease  to  operate,  and  that,  on  the 
other  hand,  when  it  is  expedient  for  the  force  to  display 
exceptional  zeal,  it  is  enough  for  one  section  of  a  con- 
ductor to  be  regarded  as  doubtful  in  order  to  replace  the 
whole  line  with  a  new  one!" 

Not  only  does  the  department  neglect  one  system 
but  it  can  completely  forget  others  still  more  neglected. 
Following  the  meeting  of  the  Flood  Commission  a  bill 
was  prepared,  including  atiKjng  other  very  urgent  sug- 
gestions, the  construction  of  cables  with  paper  insula- 
tion and  a  sufificient  number  of  conductors  along  the 

7.S7 


UllhkK    AM.    WIIV    i'Llij.lC    OU:.KRMlIl 


MAS    lAII.KD 


fortifications  of   Paris.     The  expense  was  estimated 
at  J.ooo.ooo  francs.     !-nrtunately,  iust  at  this  moment, 
an  entire  network  with  nihher  insulation  and  cast-iron 
O'lKhnts  was  (h.^ovcicd,  which  had  heen  in  place  for 
iiiore  than  fcrty  years.     It  was  t.-iind  to  he  in  a  state 
ot    reniarkahle   preservatimi.    in   spite  of   its  complete 
ahandonment.     hlxperts  declared  that,  after  sli^jht  re- 
pairs, and  at  a  cost  of  scarcely  50,000  francs  ($.^500) 
It   could   he   put   111   perfect   conrlition.      The  technical 
department   had  utterly   foi-,;tten  its  existence.     The 
inspectMr  ,,f  the  long-distance   under-round   line  con- 
nected  with   the  operating   service  discovered   it   and 
put  a  stop  to  further  discussion  of  the  hill. 

The   workmeu   '  r.ployed   in   the    Xational    Printing 
Oftice  complain  that  the  shops  in  the   Rue  Vieille-du- 
lemple  are  in  reality  >o  many  prisons,  and  that,  de- 
prived of  air  and   light,   they 'are  working  under  the 
worst  possihle  condiii.^is.     .A  reporter  sent  out  hy  the 
Matin'  gives  the  following  description  of  these  >liops : 
"fnder  liie  escort  of  Ai.  Clavel,  head  superintendent, 
I  inspec;".-d  the  workshops  of  the  National  Printing  Office' 
rummaging  into  the  most  obscure  corners.     J   went  from' 
the  cellars   to  the  roofs.     I  walked  miles  through  dark 
passages.      J   ascended  and  descended  millions  of  steps. 
I    saw    comi)osing-roonis    where    artists    executed    typo- 
graphic masterpieces.     \  .saw  type  foundries  where,  amid 
the  poisonous   vapors   of   mdted    lead,   without  air  and 
without  light,  half  naked  men  were  making  use  of  proc- 
esses and  e<juipnient  that  private  industry  abandoned  a 
quarter  of  a   century   ago.      I    saw  old   and   dilapidated 
printing  machines  under  constant  repair,  and  necessitat- 
^  Le  Matin,  January  28.   igi2. 


1>I.SI<KI)KR 


1)1.1.  \VS    AM)    KRKURS 


ing  more  outlay  in  the  way  of  labor  and  expense  than 
new  and  iiiodcrn  machines  wouUl  require.  1  inspected 
stereotyping  rooms  utterly  barren  of  the  improvements 
introduced  of  late  years.  I  saw  lithographing,  photo- 
gra{)hing  and  engraving  rooms,  rooms  where  they  were 
stitching,  binding,  fold'ng,  fastening.  1  saw  the  utter 
disorder  of  those  cemeteries  where  they  bury  the  "forms" 
which  are  saved  eitlier  because  they  can  he  used  again 
or  because  there  are  not  enough  workmen  to  arrange 
them  properly  in  tiie  lettered  cases  provided  for  that  pur- 
pose. I  saw  the  useless  and  unused  reserve  suj)j)ly  of 
new  type,  a  capital  of  several  millions,  ])iled  u[)  only  to 
justify  the  employment  of  too  large  a  number  of  foundry 
workers." 

In  1908  the  /opular  brands  of  tobacco  gave  out.* 
Why? 

When  a  good  business  man  sees  his  business  in- 
creasing he  is  careful  to  devote  a  ])art  of  his  profits 
to  the  improvement  of  his  methods  of  production. 
The  'r(jbacc(j  tie])artment  was  a!  le  to  show,  in  if)02, 
421.000,000  francs  in  gross  receijU', ;  in  IQ03,  435,- 
000,000;  in  1904,  448.000,000  francs.  But  the  gen- 
eral Inulget  was  short.  It  therefore  absorbed  the 
whole  sum.  insteatl  of  setting  something  aside  to  im- 
|)rove  the  e(|uii)nienl  of  this  special  fiscal  monopoly. 
Just  at  this  time,  and  when  the  consumption  (jf  to- 
bacco was  steadilv  increasing,  tlie  working  hours  of 
the  la])orers  in  the  tobacco  factories  were  reduced 
from  10  to  ().  .\s  a  result,  there  was  a  10  per  cent, 
loss  of  production.  Fhe  e(|uipnient  was  in  no  position 
to  offset  this  labor  loss ;  hence  the  deficiency. 

'  See  Le  Client. 

289 


WMi.Ki.  AM)  Win    rriii.ic  ownership  has  fah^eu 

In  1905  the  department  obtained  some  hundreds 
of  thousands  of  francs  from  the  budgets  of  1906  and 
1907,  to  imi)rove  its  e(|uipinent  and  factory  build- 
ings. These  appropriations,  however,  were  tardy  and 
insufficient. 

I  do  not  mean  to  imply  that  the  ofiicials  of  the 
Tobacco  department  had  not  foreseen  the  necessity 
for  this  work,  but  there  was  no  way  of  forcing  the 
minister  of  I'inance  to  grant  them  the  necessary  loans 
in  time  to  be  uf  service.  Administrative  delays  are  no- 
torious, and  individuals  wh(j  rebel  against  them  are 
sternly  taught  their  place 

The  reconstruction  of  lue  J.  B.  Say  school  has  lasted 
(1912)  more  than  twenty  years.  The  ccmstruction 
of  the  school  of  industrial  physics  and  chemistry 
(i'ficole  de  Fhysiciue  et  Chimie  Industriellesy ,  in  the 
Rue  Vauquelin,  was  decided  upon  in  1898,  but  Lhe 
first  order  was  not  signed  until  1908. 


That  misinformation  as  to  actual  conditions  prevails 
in  government  administration  is  generally  acknowl- 
edged. On  May  17.  1912,  the  French  ministry  of  Ag- 
riculture—  in  its  estimate  of  the  reforms  which  would 
be  brought  about  by  a  lowering  of  the  price  of  wheat 
— made  a  miscalculation  of  5.000.000  cwt. 

In  1909  the  Naval  Intelligence  department  caused 
a  panic  in  Great  Britain  by  announcing  tliat  Germany 
would  have  13  dreadnoughts  in  191 1  and  20  in  1912. 
Mr.  Balfour  aggravated  these  forecasts  by  announc- 
ing that  (Germany  would  have  17  dreadnoughts  in 
191 1  and  20  in  1912.  As  a  matter  of  fact,  they  will 
have  only  13  in  1913. 

290 


DlSDUliI  lv>,    DKl.WS    ANH    KKUORS 

M.  Perrissoud.  reporter  of  the  state  railway  bud- 
get of  l-'rance,  has  declared  that  "the  state  ought  to 
be  a  model  empUjyer  and  give  to  the  taxpayers  the 
largest  "pportunities  of  regulation." 

The  taxpayers  cannot  control  government  under- 
takings directly :  they  can  only  regulate  conditions 
through  their  representatives. 

The  report  of  Emmanuel  Brousse.  on  the  regulation 
of  the  budget  of  1907.  and  of  Louis  Marin,  on  the 
budget  of  the  ministry  of  Foreign  Affairs  for  the 
present  fiscal  year,  are  sufficient  evidence  of  the  diffi- 
culties experienced  in  attempting  parliamentary  regu- 
lation. 

The  more  functions  exercised  by  the  state,  the 
greater  the  effort  required  to  control  its  various 
activities. 


291 


CHAPTER    IV 


OFFICIAL   CONSERVATISM 

Industrial  Pron;rcss  Due  to  Individuals  Xot  to  Govern- 
meiU_  — Otticial  Conservatism. —  Dread  of  Innovation. — 
Departmental  Drinking  Water. — The  (".rinding  Stones 
of  the  lUireau  of  I'ublic  Charitie-.— Telephones. — Pri- 
vate and  Public  Management.— Causes  of  the  Back- 
wardness nf  the  I'.lectric  Industry  in  dreat  Britain. — 
Tools  '  he  Workshops  of  the  Miiiotry  of  War. — 
Labor  oniy.— Work  for  the  Workers  and  Xot   for 

the   Se»  »ice. 

Industrial  progress  is  clue  to  individuals,  not  to 
governments.  Xo  state  disccnered  gravitation,  and, 
if  humanity  had  waited  f<»r  governments  \'<  apply 
steam  and  electricity  to  our  daily  neetls.  we  should 
have   neither   railways,   telephones,   nor   telegrajihs. 

The  official  is  naturally  a  conservative,  and  every 
innovation  frightens  him,  because  he  is  never  sure 
how  it  will  turn  out.  If  he  is  progressive  he  is 
thwarted  hv  the  inertia  of  the  organization  of  which 
he  is  a  member.  Should  we  go  so  far  as  to  imagine 
the  administrative  group  to  which  he  belongs  as  being 
other  than  inhibitive  and  inert  other  groups  would 
still  have  to  be  c(jnsidered.  In  any  case,  it  is  always 
necessary  to  obtain  appropriation>  ■>r  s])ecial  authorUy 
beforehand  in  order  to  establish  any  public  und. mak- 
ing.    By  insisting  upon  changes  he  must  assume  some 

292 


OFFICIAL    CONSFkVA  IISM 


risk,  even  if  it  is  only  a  hunlcn  of  responsibility,  and, 
as  the  personal  hazards  to  he  run  are  L^reat,  and  the 
personal  profit  contingent  or  insignificant,  things  are 
generally  left  as  they  are. 

This  administrative  lethargy  is  fcjund  even  in  those 
government  or  ninnicipal  enterprises  which  ought  to 
he  most  progressive. 

For  example,  the  ministry  of  Public  Works  in 
I'rance  is  entrusted  with  the  supervision  of  the  Paris 
water  works.  When  i  became  minister  in  1S89  I 
found,  U)  my  great  astonishment,  that  the  mmister  and 
the  employees  of  the  bureau  had  nothing  to  drink  but 
the  water  of  the  Seine,  .\ccording  to  the  Matin,  of 
March  20,  1906,  the  minister  of  the  Interior,  whose 
department  includes  that  of  Sanitation,  was  drinking 
Seine  water  at  that  date.  The  Bureau  of  Public  Chari- 
ties of  Paris  is  still  using  grinding  stones;  it  is  con- 
sidering transfornung  them  into  cylinders.  Such 
facts  as  these,  however,  never  hinder  public  otTicials 
from  making  complimenta-y  sjjeeches  and  repnrts  ex- 
tolling the  foresight,  solicitude  and  competence  of 
the  government. 

The  Swiss  Federal  railways  have  always  been  op- 
posed to  the  creation  of  new  lines  which  might  involve 
com])etition.  In  fact,  the  department  has  demanded 
that  every  new  franchise  be  submitted  to  it.  Its  de- 
cision was  unfav(jrable  to  the  Loetschbcrg  and  Mou- 
tiers-Longeau  line,  which  is  to  bring  the  canton  of 
Bern  into  direct  connection  with  the  Simplon  tunnel. 
Although  the  canton  of  Bern  has  been  able  to  over- 
come this  opposition,  weaker  cantons  may  not  be  able 
to  do  so. 


VVHF.RK    AND    WIIV    PrPJIC    OWXnKSHIP    HAS    FAILKO 


I  have  already  outlined  the  rivalry  of  the  Prubsiau 
railways  and  the  waterways. 

The  different  state  departments  cherish  a  certain 
esprit  dc  corps,  and  each  considers  as  an  attempt  made 
ap[ainst  itself  any  proposition,  however  useful,  which 
mij^ht  interfere  with  its  own  development. 

In  his  bo(jk  entitled  Public  Ozvncrship  of  Telephones 
on  the  Continent  of  Europe,^  A.  N.  llolcombe  states 
that,  except  in  (Germany  and  Switzerland,  the  telephone 
has  been  introduced  by  i)rivate  enterprise  throughout 
all  Europe.  To-day,  excej)t  in  Denmark  and  S])ain, 
this  practice  lias  l)een  given  up.  .\  government  having 
centralized  the  administration  of  the  telegraph  could 
not  consistently  permit  the  telephone  to  remain  in  the 
hands  of  private  interests.  When  the  telephone  first 
appeared  it  was  universally  opposed  by  the  conserva- 
tive departme  its  in  charge  of  the  public  telegraph 
service.  I  hey  saw  in  it  a  competitor  whose  iniluence 
must  he  counteracted.  Later,  as  soon  as  it  was  per- 
ceived that  the  new  utility  would  survive  such  treat- 
ment, nearly  every  government  decided  to  absorb  it. 

When  the  telephone  in  its  turn  had  become  a  gov- 
ernment service  it  also  systematically  opposed  the  de- 
velopment of  all  (nher  electrical  industries,  especially 
those  using  currents  at  high  fre(|uency,  in  order  to 
protect  their  weaker  current  systems.  Technical  prog- 
ress would  assuredly  have  been  more  rapid  under  a 
system  of  comj)etiti(jn.  On  the  whole,  Mr.  Ho!cnni1)e 
is  '"avfjrably  impressed  with  the  organization  of  the 
German  telephone  service,  but  he  states  that  in  1902 

'  Howard  Economic  Studies,  Vol.  6. 

294 


OFFICIAL    COWSKRVATISM 


ihc  teleplioncs  were  lour  times  more  numerous  in  the 
L'nited  States  than  in  (lermany. 

In  Great  Britain,  in  1880,  the  telephone  was  legally 
declared  to  be  a  telegraph,  and  ulliniati'ly  it  became 
a  monopoly  under  the  postmaster-general.  In  10 11 
there  were  only  644,000  telephones  in  use  in  the  I'm- 
ted  Kingdom,  while  if  the  proportion  had  been  the 
same  as  that  of  the  L'nited  States  it  would  have  had 
3,000,000.^ 

At  the  annual  dinner  of  the  Institute  of  Electrical 
Engineers,  February  2,  191 1,  its  president,  S.  Z,  F"er- 
ranti,  said: 

"We  shall  never  know  what  the  municipalization  of 
electrical  undertakings  has  cost  us.  It  has  retarded  prog- 
ress and  is  largely  responsible  for  the  backwardness  of  the 
electrical  industry  in  Great  liritain."  * 

In  reporting  the  19 13  budget  (jf  the  French  ministry 
of  War  the  Secretary,  M.  Benzet,  writes: 

"I  have  observed  that  the  equipment  is  everywhere 
inferior  to  that  of  corresponding  private  undertakings, 
and,  when  I  ask  the  superintendents,  'Why  do  you  not 
make  use  of  such  or  such  an  up-to-date  machine  in  gen- 
eral use  abroad  as  well  as  in  France ;  or  else,  as  those  you 
have  are  good  enough  machines  although  they  are  fewer, 
why  not  multiply  them  since  they  yield  such  excellent 
results?'  I  invariably  receive  the  same  answer:  'We 
cannot  waste  our  time  over  the  question  of  equipment 

'  Communication  of  Laws  Webb  to  the  London  Chamber  of 
Commerce,  Morning  Post,  Februriry  18,  191 1. 
'Ihe  Electrical  Rcz'czv.  February  10,  1911. 

^y5 


WHF.RK    AN'I)    WHY    IHJBI.IC    OWNERSHIP    HAS    FAILED 

because,  as  a  matter  of  fact,  that  question  never  comes 
up  ill  army  and  navy  institutions.' 

"And,  -gentlemen,  this  fact  is  only  too  evident ;  for,  in 
getting,'  to  the  bottom  of  thinf,'s,  1  have  found  we  vote  ap- 
propriations for  army  and  navy  cstal)Hslinients  witliout 
even  counliii.t,'  them.  We  pour  out  llie  savinj,'s  of  the 
entire  nation  for  the  national  defense  to  ensure  the 
production  of  munitions  of  war,  and  yet  it  is  onlv  at  the 
close  of  the  fiscal  voar.  if  there  is  any  money  left,  that 
we  even  think  of  c-iiiipmen;. 

"Here  is  industrial  inconsistency  for  you.  A  nation 
that  pretends  to  he  a  manufacturer  he,i,nns  with  produc- 
tion and  it  is  not  until  later  that  it  takes  up  the  question 
of  the  efficiency  of  its  indispensable  machinery,  it  is 
scarcely  credible  that  conditions  such  as  those  which  I 
am  about  to  de^criljc  can  actually  be  rife  at  the  jiresent 
day. 

"In  the  existing  ..ystem  of  operation,  when  production 
is  heavy  there  is  a  large  demand  for  machinery ;  but 
this  is  also  the  time  when  attention  to  e(|uij)ment  can 
least  lie  spared,  because  when  production  is  heavy  there 
is  nothing;  left  at  the  end  of  the  year  to  devote  to  equip- 
ment. 

"On  the  other  hand,  when  production  begins  to  slacken 
and,  consequently,  manual  labor  is  in  little  demand  and 
it  miglit  be  j  -ible  to  employ  it  in  repairs  and  construct- 
ing machinery,  then,  according  to  the  regulations  in  vogue 
for  many  year;-,  the  working  force  must  be  reduced." 


The  Secretary  afterward  strove  to  ])rove  that  the 
"distressing  delays'  in  the  work  of  the  army  and 
navy  establishnients  were  due  in  large  measure  b  i 
extreme  bureaucratic  centralization.  He  then  ex- 
plained in  detail  the  complete  cycle  through  which  a 

2gb 


ori'u  I  \i.  c()\si:i<\  A  risM 

siiijjjk'  order  of  the  gnverniiR'Ht  must   pass,  and  con- 
cludetl : 

"I  was  anxious  to  discover  liow  much  time  would  be 
reciuired  to  till  the  simplest  order.  1  found  that  no  order 
could  he  executed  in  lesN  than  i)5  day>>  and  in  three-quar- 
ters of  the  cahcs  the-  work  would  require  155  days.  If, 
hy  an  unfortunate  chance,  however,  there  is  the  smallest 
modification  ne-essary.  eight  months,  ten  months,  and 
even  more  are  recpiired. 

"The  result,  as  may  be  readily  seen,  is,  in  the  first 
]ilace,  to  cause  a  serious  interruption  in  the  service.  I 
liave  known  cases  where  establishments  liavc  had  to  hold 
up  pressinii^  orders  to  get  the  necessary  authority  from 
the  minister  for  the  funds  recpiired  to  carry  out  the 
order  and  deliver  it  before  it  would  be  too  late. 

"I  have  already  spoken  of  the  high  cost  of  such  work. 
This  is  due  to  the  fact  that  the  superintendents,  knowing 
that  there  will  be  a  considerable  delay  before  they  can 
obtain  the  necessary  authority,  seek  to  make  up  for  lost 
time  as  far  as  possible  by  shortening  the  time  of  de- 
livery." 

As  for  the  administration  of  the  telegraph  in 
France  this  is  what  I  find  in  the  Dalimier  report: 

"After  much  hesitation  tiie  department  has  decided 
to  adopt  the  installation  of  a  telegraph  'multiple.'  The 
first  appropriations  were  made  in  the  1911  budget,  but 
the  preliminary  investigations  could  not  have  been  very 
tiiorough.  since,  despite  the  stations  established  since 
190,:^  in  the  cities  above  mentioned,  and  in  which  the 
'multiple'  system  is  in  operation,  it  was  necessary,  in 
July,  191 1,  to  ajjpoint  technical  experts  to  examine  these 
systems  with  a  view  to  choosing  a  system  adapted  to  the 
needs  of  Paris." 

297 


WHERE    AND    WllV    PUBLIC    OWNEK.MUi'    MAS    FAILED 


Protectionists  and  Socialists  are  forever  harping 
on  the  old  strain  that  governments  and  municipalities 
"ougiit  to  i)rovide  work  for  vvorkc  s."  '|"he  enterprises 
resulting  from  such  efTorts.  far  from  bringing  about 
labor  economies,  must  always  increase  lal)or  expenses. 
Among  the  excuses  assigned  fur  shorter  hours  of 
work  is  found  the  argument  that  if  each  worker  does 
only  half  duty  there  will  be  work  for  two  workers. 
Then,  not  only  must  the  working  hours  be  short,  but 
there  must  be  no  over-production  during  the  time  spent 
by  the  workmen  in  factory  or  shop.  We  encounter 
everywhere  protestations  against  piece-work  and  de- 
mands for  work  by  the  hour  "at  which  nnbodv  need 
kill  himself."  And  not  only  must  each  man  profit 
in  some  measure  by  the  right  to  be  lazy,  proclaimed  by 
Lafargue,  but  if  he  does  not  do  the  work  for  which 
he  is  paid  he  is  accomplishing  a  duty  of  high  social 
consequence  by  leaving  work  for  his  comrades. 

If  the  superintendent  of  the  workshop  wishes  to 
introduce  a  machine  which  could  do  the  work  of  four 
workmen  he  is  accused  of  taking  the  work  from  the 
laborer  instead  of  giving  it  to  him.  Conse(|uently 
he  immediately  antagonizes  all  the  labor  organizations 
and  all  the  municipal  or  government  employees.  He 
is  .starving  the  people.  He  is  neglecting  the  funda- 
mental ^  'ty  of  government  and  municipal  undertak- 
ings. He  is  a  traitor.  And,  as  an  official  must  be  a 
hero  in  order  to  face  all  this  wrath,  he  is  generally 
careful  not  to  provoke  it.  If  he  learns  that  somewhere 
a  machine  is  doing  the  work  that  he  succeeds  in  get- 
ting done  only  by  heavy  expenditure  for  labor,  he  is 

298 


Ol'l  ICIAL    CU.N.SI.KVAH.iM 

careful  not  to  ask  for  it.  If  lie  can  he  will  be  ignorant 
that  such  a  machine  exists. 

The  material  and  moral  depression  evideiU  \u  every 
state  ami  citv  undertakiu!:;  is  easily  explicable  with 
the  above  facts  iti  mind,  and  I  ha\e  t'rei|ucnily  re- 
ceived extraordinary  confidences  on  this  -ubjcct. 

The  Socialist  is  accustomed  to  declare  that  he  and 
his  comrades  are  not  enemies  of  process,  and,  in 
spite  of  the  facts,  he  will  treat  as  calumniators  those 
-who  accuse  him  of  it.  He  declares  that  Socialists  are 
not  hostile  to  new  processes,  nor  to  new  machinery, 
except  when  they  put  the  workmen  out  of  work  and 
do  more  work  at  less  expense.  It  follows  that  he  ac- 
cepts the  new  processes  and  the  new  machinery  on 
condition  that  no  economy  is  involved  in  their  use.' 

Rut  then,  what  is  the  use? 

•  See  Vvcs  Guyot.  Science  £conomique.  4th  edition,  page  230. 


299 


CliAI'TI'.k  V 


I..\I',<  i\< 


3- 

4- 


1.  •'The    r,nvcrnnieiit    a    Model     I  niplovcr.''— Raisinfr    Sal- 
aries,  Rc<liicm,t(  Hours  of  I.ahor,    I.cssetiiHL'  Ri-turns 

2.  Increasing    the     \unil)cr    of     Kniployces.— Ciovcnuiient 
Ivaiiuays. — Australia. 

Sala.        Increase     in     Paris.— Icwelers     Turiu-,!     Street 

S\vef|»ers. — .Amaljjamation. 
l>irect  aiul  Indirect  Salaries.— Outside  Work  of  the  (•m- 

ployees  of  the    Xavy   ^•a^d•>.— liicre.i-e  ni   the   Cost   of 

("onstructidu. 

5.  F->nployees  of  ilir  Western   Railway. 

6.  I'eii>ions.— -Aeii^e    Service"    .Xccordinir   to   the   I,aw  of 

1876.— Difficulties  in  the  Way  of  l".(nntahle  Wage  and 
Pension  .Atljustnient. 
The  lui-lish  Tra.ie  Unions  and  Ovcr-Cenerous  Munici- 
palities.—Influetice  of  Associations  of  Municijj.d   V.m- 
ployies. 

Salaries  of  the  .Miners  in  the  .Mines  of  the  Saar  District 
Unproductive  Character  ..f  tli.'  W„rk  .,f  Coverninent 
and  Municipal  I'.mployees.— Benjaniin  W.lton  and  the 
Inefficiency  of  Municipal  Service  in  the  L'nited  States. 
—Causes.— The  Sewer  Di,iri.rers  of  Manhattan. 
10.  •i.al)orophohia."~Tlu-  kniployees  of  the  Western  Rail- 
way of  France. 

he  I'lnpioyce^  nf  the  Swiss  Federal  Railroad.— Recall 
of  -M.  Renault  and  the  Strike  on  l-Vcnch  Covernnient 
Radways.— -Syndicalist  Action  Recognized  hv  the 
Western  State  Railway."— .M.  Goudc  and  theXavy 
Van!  at  Brest.— An  Insulting  Salutation.— School 
Teachers.— (ieneral     Labor    Confederation.— Defective 

300 


7- 

8. 
0. 


1 1 


LAltOK 

System  of  Instruction. — The  National  l^riiuinij  nffic*» 
and  the  ( ieiural  l.ahor  ('onfcdi-ratioii. —  The  "W  V. 
I"      l.iliirtv  i)f  (  Jpinion  - -<  )utraur  ami   Menace. — The 

.•\u-,tri,in  (  lianiliLT  ol  Deputies  and  the  St.ite  R;ulway 
I'.nipJi'V  ^  e-. 

12.  '.An  industrial   l'>iid.i;et."    -  T  niplnyees  the  Aetu.al  I'roprie- 

tors  of  the  Service. — The  Prophecy  of  Xuin.'  Droz.— 
Technical  Skill. — A  Inv'chtnan.  .\Iiiu-<ter  of  Pulilic 
Works.- -I  lie  Program  ot  the  I'.iiiployee.s  of  the  .\a- 
tional   i'l  intii:^  f)fhcc. 

13.  The    Ideal    .Xdniinistration.  —  Why    It    Wont    Work.— In- 

terineddlinj;- 

14.  i'niitic.il    hanger  of  (jovcvnnient   and   Municipal  I'ndcr- 

taknigs. — linif'loyccs  the  Mas!, ,  .s  ,'/  I  heir  Employers. — 
(iovcrmnctu  of  .\'e\v  Zealand  .uici  the  Strikers. — T-m- 
ployees  I'orhidden  to  Take  Part  ni  Puhlu-  XtYairs. — .\n 
Ineffectual  Prohiliitiou — -ILxchuhng  liritish  .Muincipal 
Pm[)lovces  from  the  I'ranchisc. — Suppression  of  I'oli- 
tieal  Rights  Is  the  Ine:  il.ihle  L  oiisecpieiiee  of  Ih-relop- 
ment   of    I'liblie   Operaiwn. 

15.  Rules   for  the    .Model  (io\  eminent    i".mi)loyer. 

I.  "The  goveniiiK'iit  miLiht  tn  |)r(»ve  itself  a  model 
for  all  olln-r  employers."  .Such  is  the  stereotyped 
plirase  in  ,i,^eiieral  eireiilati<ni  in  Socialist  circles,  and 
all  iliose  wlio  repeal  the  phrase  mean  by  it  tltat  the 
state  shall  raise  \vat,^cs,  shorten  hotirs  of  work,  and 
be  satisfied  with  a  smaller  return  from  labor. 

As  a  mailer  of  fad.  tliis  conception  ol  the  model 
state  is  one  of  a  robbery  of  the  whole  body  of  tax- 
pavers  for  the  sake  ui  the  minorit}-  who  will  proht  l)y 
it.  Yet  many  taxpayers  seem  resigned  to  having  such 
a  conception  realized  at  their  expense,  and  the  more 
democratic  ihe  slate  tiie  more  impcrali\e  are  the  de- 
mands of  privileged  classes,  and  the  more  chance  there 
is  of  their  ultimate  trium])h. 

.^01 


WIIKRK    AND    WH',-    ITBLIC    OWNERSHIP    HAS    FAILED 


2.  The  least  of  the  claims  of  the  average  employee 
consists  in  demanding  an  increase  of  workers  for  the 
same  amount  of  work.  This  is  one  way  of  i)roviding 
work  for  workers,  and  we  may  be  certain  that  the 
latest  comers  will  never  close  the  door. 

We  have  seen  how  such  labor  increases  work  out 
in  the  case  of  the  government  railways. 

In  Australia,  with  the  Labor  i)arty  in  power,  the 
number  of  employees  is  still  increasing.  On  the  first 
of  January,  i()ii,  the  .Xustralian  Federal  (lovernment 
had  i5,iJO  employees,  receiving  £2.098,500  in  wages; 
but  on  January  i.  1912,  they  aggregated  16,200. 
with  salaries  amounting  to  £2,720.000. 

3.  The  general  report  of  Louis  Dausset  on  the 
municipal  budget  of  Paris  for  1912  contains  tnost 
interesting  information  concerning:  th.  burden  im- 
posed ujxin  the  budget  of  the  city  and  upon  the  bud- 
gets of  the  various  local  governments  by  the  growing 
exigencies  of  their  employees. 

The  table  given  below  shows  the  considerable  in- 
crease in  the  average  salaries  of  Parisian  municipal 
workers  between  1890  and  1912: 

T1      «■    r  .  •  "''*'  '^*°*  »" 

1  ne  effective  working 

force  of  the  city..  8,152 

Expenditures     (frs. ).  10,041,234 

Average  salary  (frs.)  1.3^ 


10,972 

2,043 


12,131 

27,250,541 

2,289 


Or.  in  other  words,  an  increase  of  70  per  cent,  in 
22  years. 

It  should  be  well  imderstood,  moreover,  that  the 
net  cost  of  the  various  municipal  activities  has  also 
considerably   increased.      "It  appears,   in    fact,"   says 

302 


LABOR 


! 


M.  Dausset,  in  a  memorandum  coming  to  us  from  the 
Public  Highways  Service,  "that  the  net  cost  per  square 
meter  for  street  cleaning  has  risen  from  o  franc  381 
in  1893,  to  o  franc  417  in  1896.  o  franc  476  in  1902, 
o  franc  513  in  1908.  o  franc  557  in  1912.  This  last 
increase,  however,  should  be  ascribed  to  improvement 
m  eciuipnu'iit.  'Ihe  increase  in  labor  expenses  shown 
bv  the  budget  of  1912,  over  that  of  191  i,  amounts  to 
more  than  5.000,000  francs  for  the  municipal  em- 
ployees, properly  so  called. 

From  1908  to  19 1 2  the  concessions  granted  the 
employees  out  of  municipal  funds  have  called  for  an 
expenditure  of  16,625.000  francs,  of  which  3.976,875 
francs  went  to  the  working  force  connected  with  the 
prefecture  of  the  Seme;  4,789,794  francs  to  the  em- 
ployees of  the  gas  works,  and  473-193  francs  to  the 
various  electrical  plants. 

Moreover,  biUs  passed  up  to  the  present  have 
pledged  the  future  to  supplemental  expenditures  of 
about  3.000,000  francs,  which  will  insure  to  municipal 
laborers,  who  constitute  the  most  numerous  class  of 
municipal    employees,    an    average    salary    of    2,356 

francs. 

Now  street  sweeping  has  thus  far  been  a  monopoly 
of  unskilled  labor.  lUit  what  if  it  should  occur  to 
skilled  workers— jeweler-.  Inr  example— lured  '  he 
superior  advantages  enjoyed  by  the  gentlemen  '  2 
broom,  to  take  their  place  ?  What  then  w(juld  become 
of  the  street  s\\  j.^vers? 

As  a  matter  of  fact  and  as  a  natural  consequence  of 
its  economic  unsoundness,  this  increase  in  salary,  far 
from  being  an  advantage  to  those  for  whose  benefit 

303 


WHKRK    AND    WIIN     ri'bl.li     ( )W  \  KKSU  1 1'     II  AS    FAILED 

the    Mniiic'ij)al    Council    dc-^i^iicd  ha^    actuallv    re- 

sulted in  a  n/classificalHiii  m1'  lahor  duw  nw  artl. 

At  the  same  time  it  is  tal-.i'ii,'  workers  awav  from 
trades  in  whicli  tliey  have  passed  years  of  appren- 
ticeshij).  The  inevitable  result  of  such  labor  condi- 
tions is  only  lo(j  well  illustrated  by  the  industrial  dis- 
turljances  at  Sheftield. 

Then  the  con(liti(jn  of  the  municipal  employee  of 
Paris  has  been  improved,  not  only  by  an  increase  in 
his  salary,  but  also  by  a  decrease  in  his  hours  of  work. 
M.  Dausset  says : 

"In  our  desire  to  improve  the  oondnioii  of  municipal 
employees  we  have  sometimes  been  reiJioached  with  hav- 
\n^  ]().>  sic^lit  of  the  s*-''icral  interest  as  well  as  the  most 
urgent  needs  of  the  ])ublic  service. 

"Thi'^  criticism  has  been  especially  directed  toward  the 
street  clvaning  service.  It  has  been  said  that,  while  the 
work  to  be  done  has  notably  increascfl,  the  number  of 
working  days  is  rajiidly  diminishing,  following  philan- 
tbro[)ic  measures  passed  one  after  the  other  in  favor 
of  the  employees,  b'ull  pay  for  two  days'  rest  a  month; 
sick  days:  an  annual  vacation  of  lo  days,  lately  brought 
to  ij:  noonday  rest,  etc.  The  laborer  in  the  street  clean- 
ing department  who  in  iSqj^  furnished  annually  3,410 
hours'  work,  in  \S,c,(]  furnished  only  3,^50:  3,230  in  n/j8; 
and  2,040  in  1909,  or,  in  1908-1909,  a  decrease  of  9.5 
per  cent." 


Now  when  a  state  or  a  tnunicipality  contracts  with 
a  middleman  for  an\-  kind  of  service  it  should  have 
but  one  thought  in  nuntl  •  net  cost  and  quality  of  the 
service. 

It  ought  to  aim,  above  all,  at  economy;  because  all 

304 


LABOR 


favors  and  privilcg^es  granted  by  <tati'  men  or  adminis- 
trators are  paid  fur  by  the  taxi)ayers. 


The  Municij)al  ("numil  cm'  i'ari>  recently  withdrew 
entirely  from  the  direct  admmistration  of  its  gas 
works,  hut  it  sut)se(|uently  at)andoned  its  principle  of 
non-interterence  when  it  agreed  with  the  operating 
gas  comjiany  to  introduce  into  the  contract  between 
itself  and  the  ^-aid  company  the  alliance  of  employees 
of  the  gas  works  with  municipal  employees. 

Here  is  the  result  of  this  agreement,  according  to 
M.  Dausset"s  report : 

"Whereas  before  the  alliance  the  salaries  of  the 
gas  employees  varied  from  i.2(X)  to  3.300  francs,  imme- 
diately after  it  the  average  salary  of  the  two  most  im- 
portant classes  of  employees  in  this  industry,  viz.,  cleri- 
cal workers  and  inspectors,  rose  to  3.347  francs  follow- 
ing automatic  promotion  into  the  first  employee  class  of 
a  very  large  number  of  employees  by  reason  of  their 
length  of  service. 

"Collectors  saw  their  n.<iximum  salary  rise  from  1,800 
francs  to  3.000  francs  and  their  commission  from  50  to 
100  francs. 

"The  incessant  increase  of  expenditures  under  the 
head  of  employees  exceeds  the  economies  resulting  from 
the  improvements  introduced  into  the  manufacture  of 
gas.  L'n fortunately,  new  excuses  for  further  expendi- 
tures are  constantly  arising,  and  dangerous  precedents  are 
being  established  without  any  corresponding  decrease  in 
the  number  of  claims.  No  sooner  is  one  claim  satisfied 
than  another  bobs  up,  the  more  urgent  and  the  more 
frequent  in  proportion  to  the  amount  it  is  going  to  cost 
the  city. 

"The  labor  expenses  which  in    1908  were  30,819  595 

305 


WIIKKK    ANH    WHY     I'l  iJl.K     nw  N  I;KS  1 1  I  1'     HAS    1  AIl.KI) 

..  14,  amoimteii  in  tlic  follow  ins^;  year  to  _^  1 .7J').  i<)5  fr. 
22,  aiui,  in  n^io,  to  33, .^^-'"^S"  ^''-  .V-  "^'^  o^  wliicli  11.- 
439,896  fr.  T3  went  to  salaried  employees  and  Ji,94-',954 
fr.  15  to  laborers. 

"An  estimate  may  be  made  for  the  current  year  ( 191 1 ) 
amountii  ,,  to  a  sum  total  of  ViS-r.'^'^o  fr.,  out  of  wliioli 
12,055,000  fr.  will  go  to  employees  and  22,470,000  fr.  to 
laborer.s. 

"The  increase,  according  to  the  report  of  1910,  is  thus 
1,142,149  fr.  70,  divided  as  follows: 

Fr.  C. 

Fmployees     615.103  85 

Laborers    5^7.045  ^5 

Total  1,142.149  70 

"Now,  on  December  31,  1910,  the  effective  v.orking 
force  amounted  to  3,076  emjiloyees  and  9-354  laborers. 
But  on  November  1,  1911.  this  number  had  -hrunk  to 
3,086  employees  and  9,195  laborers,  a  net  decrease  of 
149  workers.  On  the  other  hand,  it  must  be  remembered 
that  the  working  force  will  again  increase,  as  it  does  each 
year  from  November  to  Deceml)er  31.  through  the  enlist- 
ment of  extra  men,  and  in  projiortion  to  the  amount  of 
manufacturing  undertaken. 

"In  1905,  the  last  year  of  o])eration  of  the  Paris  gas 
company,  the  labor  expenses  amounted  to  oidy  24,038,()5i 
fr.  59.  Therefore,  in  6  years,  and  excluding  supple- 
mentary pension  charges,  there  has  been  an  increase  of 
more  than  10,000,000  fr.,  by  which  gas  employees  of  all 
classes  have  benefited.  While  the  eondition  of  our  budget 
has  not  as  xet  permitted  us  to  realize  the  decrease  in  the 
cost  of  gas,  b\  zvhich  the  whole  body  of  consumers  will 
profit,  the  neiv  privileges  z>.'hich  2i'e  have  awarded  to  the 
employees  represent  more  than  2  centimes  per  cubic  meter 
of  i/as  manufactured.     In  addition  to  that  ice  give  out- 

^06 


LABOR 


nc/lit  each  year  to  the  i^as  iniployces  a  profit  of  twelve 
ddditiuiial  centimes." 

"At  this  rate  the  employees  oi  the  gas  department 
'A  ill  end  by  cutting  (jut  all  profit,"  says  M.  Car)n, 
former  president  of  the  Municipal  Council.* 

In  19 1 2  the  employees  of  the  gas  company  com- 
plained to  the  Municii)al  Council  of  Paris.  The  fore- 
men demanded  an  indemnity  for  delay  in  promotion 
as  o[uaranteed  by  their  alliance  with  municipal  em- 
ployees. Whereupon  the  administration  and  the 
Municijjal  Council  pnjmptly  recanted.  M.  Dausset 
says  in  his  report :  - 

"It  is  an  erroneous  interpretation  cf  the  agreement 
entered  into  with  the  gas  company  to  hold  that  it  has 
become  completely  identified  with  the  public  service  of 
the  city  in  all  the  detail  of  its  internal  organization  and 
functions.  The  gas  company  is,  of  course,  expected  to 
conform  to  the  wage  or  salary  scale,  and  to  the  regula- 
tions governing  jiensions,  vacations,  working  conditions, 
etc.,  in  force  in  the  municipal  service.  Nevertheless, 
each  department  maintains  its  separate  organization  and 
its  own  projjcr  functions.  Irregular  promotion^  may  (■> 
cur  auvl  the  necessities  of  the  service  can  bring  about 
the  establishment  of  new  grades  in  one  department, 
the  creation  of  which  would  not  be  justified  in  the  other. 
Although  the  prefect  of  the  Seine  has  consented  tc  a  cei- 
tain  number  of  high-salaried  positions  foi  tlie  benefit  of 
the  employees  of  the  gas  company,  iie  has  done  so  only 
from  a  '-entiment  of  good  feeling  toward  a  personnel 
which  merits  our  sympathies:  but  this  measure  ought  not 

'  Socit'ti-  (rF.coiiomie   I'olitiqiR'.     See  Jouri'.al  dcs  l:conomistes, 
Decenilier.    i()i  i 
'Conscil  Muiiuito.l  dc  I'uri:.   lorj.   \o.  46. 


WHERE   AND    WHY    PUBLIC   OWNERSHTP    HAS    FAILED 

o  lie  considered  as  a  necessary  consequence  of  the  amal- 
gamation." 

That  these  observations  ot  M.  Dausset  are  perfectly 
reasonable  is  evident  enough.  But  they  necessarily 
undermine  the  system  of  amalgan  .lion  by  proving 
that  it  cannot  be  complete.     Further  on  he  says: 

"We  do  not  I)clicvc  tiiat  there  is  any  reason  for  making 
a  new  extension  of  the  system  of  amalgamation  in  favor 
of  chaufTeurs.  The  same  thing  may  be  said  in  the  case 
of  the  bag  makers  who  arc  demanding  to  be  amalgamated 
with  the  street  sweepers." 

So  far  as  the  waste  collectors  are  concerned  the 
committee  refused  them  an  increase  of  salary.  How- 
ever, since  the  cash  clerks  of  the  city  were  receiving 
a  commission  of  300  francs,  wlnle  that  (if  the  collec- 
tors was  only  100  francs,  "there  is  a  manifest  injustice 
here,"  says  the  report ;  and  the  administration  is  rec- 
ommended to  raise  the  compensation  of  the  latter  to 
the  higher  figure. 

4.  In  all  government  service  there  are  both  direct 
and  indirect  salaries. 

To  all  appearances  the  Navy  pays  labcjrers  in  the 
navy  yards  low  salaries :  from  3  francs  80  to  4  francs, 
compared  with  5  francs  and  above  in  the  industry  at 
large.  But  the  difference,  says  the  rejiort  oi  the  C'om- 
mittee  on  Labor  .Accounts,  is  very  much  less  when 
we  consider  the  various  advantage-  enjoyed  by  the 
employees  of  the  Navy — pensions,  direct  and  indirect, 


LABOR 


« 


insurance  against  ntmeniplovnient,  treatment  at  hos- 
pitals or  at  home,  etc. 

As  a  basis  of  comparison  M.  Rousseau  takes  one 
(lav's  work  on  the  Jran  Bart.  In  this  way  he  obtains 
a  Standard  wage  ol  4  frano  for  a  working  day  of  8 
hours;  ajjprentices  included,  foremen  nut  included. 
This  makes  5  francs  15  for  a  ten-hour  day;  more  than 
the  a\L-rage  salary  in  private  undi'ria'ings.  Xor  does 
this  figure  include  either  pensicjus  (jr  '  -itions  at  full 
pay  (  which  increase  the  annual  salary  .  4  per  cent. ), 
sick  benetits,  pay  during  dull  seasons,  ^>r  "even  the  lib- 
eral allowances  which  may  \k-  granted  by  any  minister, 
such  as  pay  without  corresponding  work  f(jr  two  days 
at  Christmas  and  Xew  Year's,  or,  in  round  iigures, 
440.000  francs,  of  which  a  simple  ministerial  signature 
can  relieve  the  treasury." 

The  effect  produced  upon  the  cost  of  naval  con- 
struction in  our  navy  yards  b}-  the  shortening  of  the 
working  day,  as  well  as  by  vacations  at  full  pay,  for 
which  the  budget  of  191 1  granted  the  first  appropria- 
tion, is  shown  by  the  following  table,  which  estimates 
the  cost  of  the  work  on  the  Jean  Bart,  (jn  the  basis  of 
a  9>2-hour  day,  an  8-hour  day,  and  a  7-hour  40-min- 
ute  day,  the  latter  corresponding  to  an  8-hour  day 
shortened  by  the  fraction  1/24,  representing  15  days 
of  vacation  with  pay. 

The  Committee  on  Labor  Accounts  declares  that 
"the  new  institutions  in  the  Navy,  by  reason  of  the 
8-hour  day.  find  themselves  at  a  disadvantage,  com- 
pared with  the  industry  at  large,  both  from  the  point 
of  view  of  rapidity  of  construction  and  net  cost." 

309 


wiiiiRfc;  AND  Win    I'lni.K    own'krsiki'  has  faii.ki 


The  salary  rcmamiii';  the  .>aiin'   fur  a  dav  of 


Tlie  coH'^trnctioii  of  tin- 
Jean  Bart  wniilii  require: 

Days     

Or   in    tiKMiey    (fr;iius) 
The   miiiiiiuiin   pension    (25 
years    of    service)    is    ob- 
tained by  an  active  serv- 
ice  (luring: 

Hours     

The  construction  of  the 
Jean  Bart  gives  pension 
rights  to : 

Men    

The   relative  ;innual   charge 
resuhing  is : 
Francs    


o  hrs  ,iO  mm 


I..SI5.7'» 
6.230,000 


71.250 


202 


1  2  1 ,200 


8  liuur*         7  hri.  40  min. 


1,800,000 
7,400,000 


60,000 


240 


144,000 


1,880,000 
7,727,000 


57.450 

250 
150,000 


M.  Cuvinot,  who  reported  oii  the  Xavy  hud>iet  in 
the  Senate,  has  estimated  the  loss  resulting  from  the 
shortening  of  the  working  day  to  8  hours  at  4,500,000 
francs. 

The  employee  of  the  navy  yards  knows  how  to 
make  protitable  use  of  his  leisure  hours.  In  liis  I'uy- 
ayc  Rcvolutionmiirc,  M.  Griffuelhe  declares  that  by 
beginning  work  in  the  morning  at  7  o'l  k  and  cjuit- 
ting  at  5,  he  is  "one  of  those  employees  who  increase 
their  salaries  by  working  a  couple  of  hours  more  at 
some  emi)l(jyment  in  the  city.  A  number  work  in 
barber  shops,  others  are  carpenters,  shoemakers,  etc." 
The  work  of  these  government  employees  thus  con- 
stitutes competition  of  a  privileged  class  against  the 
workers  employed  l)y  private  industry. 

^Moreover,  T  liave  been  told  that  the  laborer  in  the 
navy  yard  husbands  his  strength  during  the  day  in 

310 


LABOR 


I 


(inler   td   he   able   In   make   better   use   of   his   leisure 
hours  in  llie  city. 

5.  The  reinstatement  of  all  railway  employees  af- 
ter the  recent  railway  strike  has  contirmed  the  con- 
viction that  they  are  the  masters,  and  that  it  i'^  suthcient 
for  them  to  threaten  in  order  to  obtain  what  they 
want.  Among  other  thini^s.  they  have  obtained  a  sys- 
tem of  regular  promotion,  whuh  makes  it  easy  for 
them  to  dispense  with  all  energy  and  zeal. 

Moreover,  as  if  in  order  to  encourage  further 
claims,  M.  ("heron  has  taken  care  to  make  a  comjiara- 
tive  table  of  the  condition  of  the  railway  employees 
before  and  after  the  purchase. 

Wrstcm 
Company  (19081      (lovernment  (loui 

Deficits  from  operation    25,8  .'2,o<x3  fr         8  ?.()7,V000  fr. 

The  increase  in  operating  costs  is  7 J. 304,000  francs. 
The  employees  are  responsible  f<«r  5J,J96.ooo  francs 
of  it.  This  increase  was  prophesied  by  the  opixments 
of  the  purchase. 

We  have  just  seen  how,  at  the  very  time  it  was  prov- 
ing its  inability  to  maintain  order  or  to  keep  its  em- 
ployees at  work  in  the  arsenals  of  the  Navy,  the  gov- 
ernment must  needs  assume  the  responsibility  of  di- 
recting more  than  50.000  railway  employees.  More- 
over, as  a  result  of  this  increase  in  the  number  of  gov- 
ernment employees,  the  number  of  pensi'ms  has  like- 
wise increased.  By  l.nvcring  the  age  limit,  the  same 
result  has  been  effected.  The  same  public  utility  or  any 
other  undertaking  nnist  pay  each  employee  not  only  his 
salary  but  two  or  three  pensions  beside.     Thus  we  are 


W  UKRK    AND    U  1  n     I'lmiC    OWM-RSIIII'    Il\.s    1  AII.Kn 

cstrihlisliuiL,'   a    clas-s   nt    sciiii-iiKlrin  ndcni    ,i;ciiikiiu'ii, 
who  live  at   ihc  (•\iicn<c  of  the  taxjiaycr.  who  (.noii. 
thank'<  to  tlu'  |ifn--!"ii  which  thev  ('iijny,  make  danm'r 
ous  and  niid(rhi(hlin,iL;  competitors  of  free  laljor. 

Ill  h;-~  pit  Imimarv  wnrk  on  tlic  law  of  Jniic  <). 
1853,  M.  Stoiirm,  councillor  of  state  and  govcrnincnt 
comniissjonfr,  defined  acti\c  -service  as  "a  da\'  and 
night  service  which  exposes  those  engaged  in  it  \i^ 
fatigues,  diseases  and  dangers."  '  'I'he  law  of  Au- 
gust 17.  iS^f).  classes  among  thd-e  in  "active  ser\  ice" 
insi)ectors.  superint.'  'ents,  and  teachers  employed  in 
the  primary  normal  scIiooIn,  })uMic  schoi)l  teachers,  and 
matrons  of  orphan  asylums. 


The  cmjiloyees  contiected  with  the  prefecture  of 
the  Seine  were  anxious  to  ohtain  the  pensif)n  projjor- 
tioned  to  the  time  i>i  service,  provided  for  hv  Article 
Q  of  the  law  of  Jul\  _' i ,  i()0<).  and  given  to  em- 
plo\ces  of  the  railways,  who  "(piit  the  service  either 
volunlaril)  or  for  an\-  other  cause,  if  they  have  heen 
affiliated  with  it  more  than  13  vears."  - 

The  Municipal  Council,  however,  declined  to  be 
so  generous.  It  reduced  1)\-  a  half  the  length  of  service 
pension  of  the  employee  who  had  heen  dismissed,  and 
it  refused  to  the  official  who  had  left  the  service  all 
right  to  a  pension. 

I'nder  the  ahove  conditions  the  police  were  granted 
pensions  for  life,  duly  proportioned  to  their  term  of 

^Movitriir,  M.iy  17,   1833. 

'Yves  Guyot,  Les  i'hrmiiis  de  Frr  et  la  Grcvc.  page  149. 

3'^ 


LABOR 

service.  The  sum  amounted  to  1,300,000  francs  in 
191  I.  In  rri^ard  to  active  service  the  rafng  is  50  years 
of  age  and  10  years  of  service,  dhe  i  ..'"e  was  fixed 
at  10  years  m  order  to  help  out  former  uon-commis- 
sioned Ollicer-  .idmittcd  to  the  puhhc  service  and  who 
linld  fdur-littli.^  "I  the  i)ositioi.s  availahlc. 

I'.mplovees  and  workmen  attached  to  the  govern- 
ment have  hut  otic  thought,  to  hunt  up  excuses  and 
methods  to  "imprMve  tlieir  situation."  Among  the 
excuses  is  a  verv  ^impU'  cme.  ready  to  hand  for  every 
occasion,  and  liavnig  a  certain  degree  of  justice  m  it 
— ecpial  work,  eipial  wages.  Such  or  such  an  em- 
ployee, in  such  and  such  a  service,  receives  such  and 
such  wages  and  such  and  such  a  pension;  why  not  I? 

Before  the  purchase  of  the  Western  railway  the 
opponents  of  the  measure  said  to  the  government: 
The  empl'iyees  and  lahorers  on  the  lines  already  he- 
longing  iM  the  state  are  receiving  salaries  and  pensions 
greater  than  those  of  most  ot  y(jur  other  employees, 
and  yet  you  would  increase  their  numher.  The  em- 
ployees of  the  Customs,  the  rosti^ffice.  the  police  and 
other  puhhc  departments  will  demand  alliance.  What 
will  vonr  answer  he?  ^ 

I  note  in  the  Journal  Officid,  of  July  27,  a  series 
of  (juestions  put  hy  Patureau-Mirand.  one  of  the 
deputies,  to  the  minister  of  Finance,  in  which  this  idea 
of  alliance  was  constantly  referred  to.  Here  are  two 
of  these  rpiestions : 

M.  Patureau  Mirand  asked  the  minister  of  Finance 
whether  he  intended  to  incorporate  in  his  budget  a 

'  See  Yves  Guyot,  Les  Chctmns  de  Fer  ct  la  Grtve,  page  50. 


WIIIKl-    ANT)    WHY    IM'lll  IC    OVVM.KMIII'     llA^    lAII.KD 

plati  fcr  raising  by  a  ftnth  the  wages  or  salary  of  thr 
ficccast'd.  with  a  mininiuin  of  J^o  francs  at  Paris,  ami 
150  francs  in  the  provinces,  as  is  done  in  the  case  ol 
the  employees  of  the  state  railways,  who  are  rcceiviiii; 
a  wage  less  than  4,000  francs;  and  an  .diowance  for 
burial  expenses  to  customs  officials  and  state  factory 
workers  wh  >  tlie  in  active  service — an  allowance  which 
woulfl  amount  10  onlv  60  francs  in  the  first  case  and 
50  francs  in  the  second. 


"Answer — In  the  state  factories  the  allowance  of  60 
francs  (to  sntiordiiiatc  officials)  or  50  francs  (to  labor- 
ers) is  granted  not  only  on  the  occa^^ion  of  the  death 
of  employees  in  active  service,  but  aNo  at  the  death  nf 
employees  who  have  left  the  service.  In  this  latter  re- 
spect tiic  employee^  of  state  mantifacturing  enterprises 
are  treated  more  generously  than  those  of  the  state  rail- 
ways. 

"I'ecause  of  the  excessive  expense  which  would  re- 
sult from  such  a  measure,  it  is  apparently  not  possible 
to  increase  the  figure  to  the  sum  demanded.  In  any  case, 
the  (pu'stion  would  have  to  l)e  made  the  subject  of  an 
exhaustive  investigation  with  respect  to  all  the  trading 
undertakings  of  the   state. 

"Answer  of  the  minister  of  Finance  to  question  number 
2,116  put  by  .M.  Patureau-Mirand,  deputy,  July  12,  1912. 
M.  t^aturtau-Mirantl  asked  the  minister  of  Finance 
whether  he  intended  to  provide  in  his  next  budget  for 
a  grant  having  a  retroactive  etTect  in  favor  of  subordinate 
officials  and  employees  ot  government  manufacturing 
enterprises  who  have  been  granted  medals  of  honor,  a 
special  bounty  of  100  francs,  as  is  done  in  the  case  of 
employees  on  the  state  railways  on  whom  the  medal  of 
honor  has  been  conferred. 

314 


k 


LABOR 

"Answer — The  question  nf  the  rwvardinp  of  honntic; 
to  ■^rovc-rnnuMit  iiT^jHctors,  atui  iiiiployecs  granted  the 
medal  of  honor  for  etfuifnt  work,  is  of  interest  not  only 
ir)  the  employees  of  the  state  inannfaitnruiL:  enterprises. 
hnt  riNo  to  tho^e  connected  with  the  other  ^overrmient 
tiadint,'  luidcrtakincs.  Therefore  it  cannot  he  decided  ex- 
cept after  an  exlianstive  study  tending;  to  determine  the 
fmancial  (oii-^eciiuiiccs  uliiili   woidd   result. 

"In  any  event,  there  could  he  no  question  nf  prantinu: 
a  hounty  with  a  retroactive  ettect  to  all  employees  uiion 
wiiom  tiie  medal  has  heen  hestowed,  hecause  of  the  con- 
sidcrai)le  hurden  that  such  a  measure  would  entail  upon 
the  hudget." 

The  minister  of  Finance  confines  himself  to  "trad- 
ing undertakings."  How  ahout  the  employees  <>i  other 
state  activities,  viz. :  ttie  Customs.  Direct  Taxation, 
etc.  ^  Will  they  not  have  the  right  to  ask :  "Why  are 
wc  left  out  ?" 

Inder  the  pressure  of  this  feeling  and  the  demands 
of  labor  associations,  which  have  made  more  or  less 
direct  declarations  of  similar  sentiments,  a  hill  has 
heen  passed  entailing  still  further  expenditures  for 
the  improvement  of  the  conditions  of  the  nployees  of 
the  Postoffice.  Telegraph  and  Telephone  department; 
the  Bureau  of  Indirect  Taxation,  and  the  Customs  of- 
fice. These  expenditures  amount  to  36.870. Soo  francs, 
2Q.990.800  francs  of  which  goes  to  the  employees  of 
the  Postal.  Telegraph  and  Telephone  department. 
4.650,000  francs  to  the  employees  of  the  Bureau  of 
Indirect  Taxes,  and  2.239,000  francs  to  those  of  the 
Custom  House. 

3'5 


WHERK    AND    WHY    PUBLIC    OWNERSHIP    HAS    FAILED 

The  offi' ,al  explanation  of  the  underlying  motives 
inspirinf^  this  l)i]l  brings  out  the  necessity  of  amalga- 
mation for  the  sake  of  the  oificials  and  subordinates  of 
the  I'ostofticc:  it  adds  ihat  the  expenses  just  quoted 
will  have  an  immediate  effect  upon  the  financial  con- 
dition of  the  indirect  tax  officials  and  of  a  part  of 
the  employees  of  the  Custom  House.  It  was  to  take 
effect  October  i.  19 12,  The  budget  of  1913  will  have 
to  provide  7,000.000  francs  of  the  total  sum.  The 
measure  will  be  in  full  innning  order  in  1916. 

During  the  course  of  the  Teachers'  Congress,  at 
Chambery.  M.  (uiist'hau  anounced  that  he  would 
not  permit  associations  of  teachers  to  become  affili- 
ated with  the  workers'  exchange  ( Bourse  du  Tra- 
vail), but,  in  lieu  thereof,  he  promised  to  grant  them 
concessions  amounting  to  40,000,000  francs  to  be  dis- 
tributed over  a  period  of  five  years. 

We  may  be  certain  that,  after  the  appearance  of 
the  next  budget,  deputies  will  be  demanding  a  short- 
ening of  the  time  for  the  distribution  of  the  77,000,- 
000  francs. 


7.  The  English  trade  unions  complain  that  the  mu- 
nicipalities make  better  conditions  with  employees 
than  can  be  obtained  from  private  enterprises.  They 
consider  the  municipalities  as  dangerous  competitors ; 
for  in  Great  Britain  the  members  of  the  trade  unions 
threaten  to  abandon  them  in  order  to  become  members 
of  the  Municipal  Employees'  Association.  The  Con- 
gress of  Trade  Cnicjns  of  Liverpool  passed  a  resolu- 
tion on  this  matte;-  in  1906. 

316 


■3 


LABOR 


I 


f 


Although  the  various  public  undertakings  of  Man- 
chester have  passed  a  resolution  urging  that  the  rec- 
nmniendations  of  municipal  councillors  he  ignored, 
it  is  scarcely  probable  that  the  resolution  has  produced 
nny  efifect.  Accorrling  to  the  investigation  of  '1  he 
Xational  Civic  Federation  of  the  United  States  all  the 
numicipal  \v<irkeis  of  Tdasgow  are  recomineivK'd  by 
niunicii)al  councillors.'  Moreover,  according  to  the 
report  of  the  same  investigators,  throughout  all  <  ireat 
Britain  the  municipal  departments  negotiate  with  the 
representatives  of  employees.  As  these  latter  are  at 
one  and  the  same  time  employees  and  electors,  they 
thus  become  the  masters  of  those  whom  they  ought  to 
obey:  and.  ilie  more  their  number  grows,  the  more 
concessions  they  exact  at  the  expense  of  their  fellow- 
citizens. 

At  West  Ham  the  Municipal  Council  delayed  the 
opening  of  its  session  ni  order  that  municijial  em- 
plovees.  sewer  diggu's,  >lreft  sweepers  and  teamsters, 
could  attend  and  make  known  their  opinions. 

The  Xational  Inion  of  (ias  Workers  and  (leneral 
Laborers,  organized  in  1889,  represents  the  trade 
unions  of  the  unskilled,  that  is  to  say,  the  manual 
laborers.  It  has  had  at  its  head  such  lea<lers  as  John 
Pnirns.  Tom  Mann,  Ben  Tillett.  and  Will  Thorne.  In 
1 8(^0  it  organized  a  strike  at  Alanchester.  and  was  suc- 
cessful; with  the  South  Metropolitan  Company  it 
failed.  It  numbers  30,000  members,  distributed 
among  the  various  municipal  gas  undertakings,  but  its 

'  Miinliipa!  and  Private  Operation  of  PHblic  Utiltir.f,  Na- 
tional Civic  I-cuv'ralioii,  1907, 

3^7 


w  iikrf:  and  wiiv  public  ovvnershif  has  failed 

membership  also  extends  into  various  private  enter- 
prises wlii'-h  mannfacturc  other  products  than  gas. 
Article  lo  of  its  platform  is  worded  as  follows: 

"To  insure  tlie  sending  of  members  of  urban  district 
council^  as  representatives  on  boards  of  guardians,  in 
nuniici[)al  bodies  and  in  rarlianicni  only  on  condition 
tbpt  tbey  l)e  partisans  of  puidic  ownership  of  the  means 
of  production,  distrilnition  and  exchange." 

In  1892  the  Union's  general  secretary.  Will  Thorne, 
was  elected  member  of  Parliament  for  West  Ham. 
It  has  also  had  other  electoral  successes. 

In  1905  Keir  Hardie  formed  the  Municipal  Em- 
])loyees"  Association.  Its  defenders  say  that  it  con- 
tains 2,000.000  members,  a  membership  which  would 
appear  to  be  greatly  exaggerated.  But  there  are  asso- 
ciated local  unions. 


8.  The  state  does  not  pay  higher  salaries  than  pri- 
vate industry,  except  when  it  is  compelled  to  do  so 
through  the  weakness  of  state  officials.  In  Prussia, 
where  tlie  Sectoral  influence  (;f  the  workers  is  feeble, 
the  maximum  salaries  of  the  fiscal  mines  of  the  Saar 
district  were,  in  1908,  much  lower  than  those  paid  by 
private  industry  in  the  valleys  of  the  Ruhr  and  of  the 
Wurm;  whereas  the  cost  of  living  is  practically  the 
same  in  all  these  districts.  According  to  a  memorial 
addressed  by  the  .Association  of  Christian  Miners  to 
the  Prussian  ministry  of  Commerce  and  Industry,  on 
the  22nd  of  October,  the  annual  average  of  salaries 
has  been  decreased  by  reason  of  unemployment  and 
reduction  of  wages. 

318 


LABOR 


» 


i 


Salaries  in  the  Saar 
District 

Difference 
OF  La 

IN  Favor 
Ruhr 

Difference  in 
Favor  of  Wurm 

Per 
Year 

Per 
Workday 

Per 
Year 

Per 
Workday 

Per 
Year 

Per 
Workday 

Marks 

Marks 

Marks 

Marks 

Marks 

Marks 

1908 
1909 
1910 
1911 

1,182 

1-136 

1,122 

570 

4.04 
3.96 
3  97 
4.02 

313 
214 
260 
136 

0.78 
0.59 
0.57 
0.63 

227 
208 
257 

114 

0.53 
0.49 
0.52 
O.S9 

The  facts  thus  brought  out  were  not  denied  in  the 
Chamber  of  Deputies,  but  the  minister  answered  that 
it  was  impossible  to  increase  profits  and  salaries  at  the 
same  time. 

The  miners  also  complained  that  salaries  continued 
to  decrease  in  face  of  the  higher  cost  of  food.  More- 
over, they  brought  up  the  interesting  comparison 
that,  in  1908,  an  increase  of  salary  had  been  granted 
to  the  mine  officials,  while  the  miners  were  voted  a 
substantial  decrease. 

9.  As  causes  are  practically  identical  in  all  countries, 
so  effects  are  usually  identical.  Characteristic  of  this 
universality  of  cause  and  effect  is  the  absence  of  pro- 
ductive energy  in  the  work  of  the  employees  and 
laborers  of  national  municipal  undertakings.^  From 
1893  to  1902  the  department  of  Public  Works  carried 
on  a  number  of  undertakings  for  the  London  County 
Council.  Seventy-nine  thousand  pounds  sterling  was 
demanded  over  and  above  the  original  appropriation. 

Two  years  afterward  it  was  declared  that  these  con- 
structions have  cost  £40.ocxD  more  than  would  have 
been  the  case  if  they  had  been  confided  to  a  private 

"  See  Raymond  Boverat,  Le  Soci^lisme  en  Angleterre. 


WHERE    A\D    WHY    I'CBl.IC    OWXKRSHIl'    HAS    FAILED 

company.     Tlie  (lifffrLncc>  in  ihc  CNliniates  Miliunltcd 
varied  from  i  i  to  .jo  jifr  cx-nt." 

Lord  AvL'bnry  says:  "A  municipal  workman  lays 
300  bricks  during  hi>  day's  vvcirk,  where  the  American 
laborer  will  la\'  from  j.ooo  to  j.you." 

An  alderman  oi  West  i  lam  calls  the  system  of  con- 
struction under  municijjal  direction:  •'The  monopo- 
lizing of  laziness." 

A  nuuiiciijal  councillor  of  the  same  municipality 
answered:  "I  care  little  al)r)ut  the  taxes  or  about 
those  who  pay  them.  W;  t  I  am  iiUeres'.ed  in  are 
my  electors."  - 

Benjamin  V.  Welton.  engineer  in  charge  of  the 
Bureau  of  Kfliciency  in  Xew  N'ork.  savs  of  the  pro- 
ductive energy  of  municipal  workers:  ■' 

"Except  to  the  few  who  have  made  a  study  of  the  sub- 
ject, the  extent  of  municipal  inefticicncy  is  almost  unbe- 
lievable. Lacking  the  measure  of  efficiency  in  private 
enterprise,  there  can  be  no  conception  of  the  actual  inef- 
ficiency of  public  service." 

During  the  last  five  years  Mr.  Welton  has  been 
making  in\estigati(jns  in  several  of  the  boroughs  of 
New  \'ork  City  for  the  Commissioners  of  Account>. 
and  in  Chicago  for  the  Merriam  Commission.  .\t  first 
the  observaticjiis  were  secret:  afterward  a  duplicate 
series  was  conducted  openly.     By  comparing  the  earlier 

'  The  Accountant.  July    t,i.    1X07. 
I  lie  Tifves.  Septcmher   16,   njoj. 
*  EfRciency    m    City    Gove>nmcnt.    .-Uuial.s    of    the    .Imencan 
Academy  of  Pontical  and  Socio!  Sciauc  May,   lyij,  page   103. 

320 


LABOR 


observations,  which  would  obviously  indicate  noriual 
inefficiency,  with  those  made  later,  it  was  ascertained 
that  the  loss  of  efficiency  varies  from  40  to  70  per  cent. 
The  loss  of  efficiency  in  the  work  dcjiie  for  a  great 
municipality  may  therefore  be  estimated  at  about  50 
per  cent. 

The  City  of  New  York  pays  $17,000,000  to  its  mu- 
nicipal workers.  The  inefficiency  in  the  W(jrk,  there- 
fore, represents  a  loss  of  $8,500,000.  Mr.  Welton 
gives  an  excellent  explanation  of  the  causes  of  this 
inefficiency.  They  are  the  same  everywhere.  Meas- 
ures are  taken  to  guarantee  control  uf  expenditures 
and  prevent  favoritism,  but  without  accomplishing 
anything  in  the  end.  From  the  point  of  view  of  em- 
ployment, lists  (if  preferred  candidates  play  a  deplora- 
ble role.  Men  have  brcn  employed  in  moments  of 
pressure  and  afterward  been  discharged.  These  are 
naturallv  the  least  capable ;  but  they  are  placed  upon 
preferred  lists  and  thus  they  ultimately  c«ime  to  form 
the  real  personnel. 

No  employee  can  be  forced  to  render  any  service 
not  previously  contracted  for.  This  is  one  way,  of 
course,  of  combating  favoritism,  but  a  very  incon- 
venient one.  Moreover,  the  City  of  New  York  must 
accept  as  employees  veteran  soldiers  and  firemen. 

The  fiscal  authorities  demand  economy,  but  they 
understand  by  the  term  not  efficiency  of  service,  but 
rather  the  conservation  oi  funds,  bur  ^ome  years  in 
a  certain  number  of  cities — anK'H^  dlhers  New  York 
and  Chicag(J — a  form  ui  control  has  been  in  opera- 
tion known  as  the  "segregated  budget."  b.ach  item, 
whether  of  labor,  of  material,  or  of  eiiuipment,  must 

?,21 


WHKKK    AND    WHY    l'l'IJI.((     ()\V  N  KKSH  1 1'    HAS    KAILEl) 

he  charged  to  itN  particular  fund.  The  total  for 
each  is  fixed  hy  the  fiscal  authorities,  and  no  modifica- 
tion of  it  can  be  made  without  the  authorization  of  the 
body  which  origiiiall}-  established  the  amounts.  But 
action  is  paralyzed  by  too  much  control.  This  method 
of  regulation  fixes  in  advance  the  number  of  em- 
ployees, the  rate  of  their  salaries  by  the  day,  and 
makes  any  increase  in  the  number  of  employees,  or 
any  modification  of  their  salaries,  impossible  without 
the  censorship  of  the  highest  city  otiicials.  As  a  result, 
inefficiency  is  not  penalized,  nor  is  efficiency  rewarded. 

The  municipality  generally  pays  fnjm  jo  to  50  per 
cent,  more  f(jr  cumir.  m  labor  than  does  the  contractor. 
The  work  hours  are  shorter  in  conse(|uence  of  measures 
passed  either  by  the  state  or  by  the  municipality  for 
political  ends. 

Salaries  are  paid  regularly,  but  without  considera- 
tion for  special  skill  or  energy,  thus  inviting  inel^- 
ciency.  .\  capable  w(jrkman  or  emplcjyee  will  natur- 
ally avoid  a  system  in  which  capacity  counts  for  little 
while  political  intervention  is  all  powerful. 


"When  an  employee,"  says  Benjamin  F.  Welton,  "can 
do  what  he  likes  ami  snap  his  fingers  in  the  face  of  his 
superior  if  he  is  reprimanded,  the  efficiency  of  the  entire 
force  to  which  he  belongs  is  gone.  It  is  not  uncommon 
fur  a  foreman  to  suspend  a  laborer,  request  iii^  discharge, 
and  then  be  instructed  to  reinstate  him  and  '-leave  him 
alone."  After  such  a  performance  how  can  it  be  expected 
that  the  foreman  can  compel  the  obedience  of  the  re- 
mainder of  his  force?" 

122 


LABOR 

The  greatest  a'nonni  of  lost  effort  comes  from  wast- 
ing time. 

There  has  been  Httle  attempt  made  to  compare  mu- 
nicipal with  private  labor  productivity.  I'urthermore, 
municipal  records  arc  not  to  be  depended  upon.  Fore- 
men will  exaggerate  the  favorable  results,  and,  what 
is  worse,  conceal  the  losses. 

The  system  of  reports  dealing  with  the  financial 
needs  of  an  enterprise  are  usually  made  out  without 
consideration  of  the  amount  of  work  turned  out.  In 
fact,  the  reports  do  not  even  accurately  redect  the  con- 
ditions which  they  are  expected  to  make  clear.  The 
connection  between  results  and  expenditure  is  almost 
never  determined. 

Among  the  suggested  remedies  for  this  state  of  af- 
fairs are  to  be  found :  An  effective  method  of  engag- 
ing employees;  introduction  of  strict  methods  of 
discipline;  great  latitude  in  the  discretionary  power 
of  the  department  concerned;  permission  to  punish 
negligence  and  laziness  and  to  reward  zeal.  But  all 
these  measures  are  incapable  of  fulfillment,  because 
they  provoke  accusations  of  favoritism  and  probably 
would  engender  it. 

Mr.  Welton  shows  how  economy  can  be  brought 
about  in  an  undertaking.  In  1910  the  Commissioner 
of  Accounts,  at  the  invitation  of  the  Borough  FVesi- 
dent  of  Manhattan,  undertook  the  reorganization  o{  a 
part  of  the  maintenance  force  of  the  Bureau  of  Sewers. 
This  service  included  24  cleaners  and  38  horses  and 
carts,  divided  into  12  gangs  of  workmen,  each  vvith  its 
(jwn  foreman.     The  cost  was  about  $4  per  cubic  yard. 

323 


=i -1 


WHERE    AND    WHY    PUBLIC    OWMr.KSHIP    HAS    KAILKl) 

In  a  lew  iiKiiitlis  the  miniber  of  j:;aii<,rs  aiul  forciin  ii 
was  reduced  frcmi  ij  to  4.  the  ckaner^  t'roiii  J4  tn  U). 
the  horses  and  carts  from  .jS  to  14.  I'nHhictioii  ua-, 
increased  100  per  cent.;  wages,  15  per  cent.;  the  aver- 
age cost  per  cubic  yard  was  reckiced  from  $4  to  $1. 15. 
The  net  result  was  an  increase  in  efficiency  of  -'75  per 
cent. 

But  can  reforms  giving  similar  results  be  made  gen- 
eral ?  Many  such  cases  do  not  destroy  the  viciousness 
inherent  in  the  general  system. 

10.  Emmanuel  Brousse  once  declared  that  the 
French  government  did  not  adopt  the  system  of  over- 
time for  extra  work  because  such  work  was  done 
during  the  ordinary  working  hours  of  the  depart- 
ment. 

One  department  head  answered :  "If  I  did  not  have 
premiums  at  my  disposal,  the  work  could  not  be  done 
at  all.  The  majority  of  the  employees  never  come 
to  the  bureau,  and  those  who  do,  being  obliged  to  do 
the  work  of  the  others,  must  be  indemnified  for  the 
extra  work  they  do." 

I  know  the  danger  of  such  generalizations.  There 
are,  in  all  the  departments,  men  who  work,  but,  as 
Bugeaud  said,  these  are  always  the  ones  who  commit 
suicide.  Others,  on  the  contrary,  religiously  practice 
the  well-known  commandment:  "Never  do  to-day 
what  another  can  do  tomorrow." 


And.  not  only  is  the  work  to  be  gotten  out  of  a 
national  or  municipal  employee  or  laborer  below  par, 
he  has  also  all  sorts  of  resources  for  reducing  it  to  a 


o-t 


LABOR 


still  lower  grade.     Among  others  we  find  the  disease 
uiiicli  has  been  called  laborophobia. 

AuKing  the  municipal  employees  of  the  City  of 
I'aris  the  munhcr  of  sick  days  has  increased  as  fol- 
lows: *  From  1896,  when  an  account  of  these  ab- 
sences was  begun,  to  i<j(jS,  according  ti>  statistics  of 
ilic  Bureau  of  I'ublic  iligluvays.  the  number  of  hours 
of  work  has  decreased  from  13,458,81"  hours,  to 
iJ,()9J,7i8  hours,  or  a  difference  of  466,()i;9  hours. 
The  number  of  hcnirs  of  absence  on  account  of  illness 
has  risen  from  556,440  to  1,056,464,  ur  a  difference 
oi  500,024. 

"This  doubling  of  the  number  of  sick  days  within  a 
period  of  a  few  years;  this  characteristic  decrease  in  the 
productive  energy  of  the  worker — of  this  worker  who 
each  day  is  better  paid  and  less  worked  and  provided  with 
a  greater  number  of  rest  days — testifies  to  a  deteriora- 
tion in  the  ideal  of  loyal  service  which  the  Council  can- 
not afford  to  overlook." 

I  must  bear  witness  that  it  is  devoting  itself  to  the 
question,  and  that  the  lumiber  of  sick  davs  is  decreas- 
ing. From  8.27  per  cent.,  in  1907,  it  has  been  lowered 
to  6.44  per  cent.,  in  Kjii. 

The  same  professional  malady  has  raged  with  in- 
tensity among  the  empkjyees  of  the  government  rail- 
ways, according  to  the  report  of  P.  Baudin  on  the  sup- 
plementary credits  of  the  government  railways  for 
the  month  of  July,  k)I2.  Here  is  the  efTect  of  the 
measure  granting  full  pay  to  employees  reporteil  ill: 
In    if)Oc^   the   numbi  r   of   sick   days   was   j.74.000:   in 

'  Ihe  report  of  M.  Dausset  on  the  budget  of  the  city  of  Paris, 
1912. 

6^5 


WIIIKE';    AND    VVIIV    I'UIU.IC    OWNKRSHIP    MAS    FAII.KI) 

i<)ii  it  liad  risen  to  ()^(),(.hk),  <ir  an  iiitrcase  of  i8_',- 
ooo  sick  (lays  in  two  years.  (  )ut  of  (>7.n(^7  employees 
^6..Si(),  or  54  JUT  c-ci.l..  were  rendered  incapable  of 
work  in  account  of  illness.  'I'his  proportion  of  in- 
capacitated men  is  dis(|uietinj,^  only  from  the  point  of 
view  of  tiie  iinances  of  the  railway  .,ystem  and  its 
defective  administration. 

.\i,Min.  while  only  a  i)art  of  the  emphjyees  were  en- 
joying these  hours  of  leisure,  it  was.  of  course, 
necessary  to  increase  the  effective  force  by  7,440 
units,  representing  15.539.900  francs  of  added  ex- 
pense. 

1 1.  Hven  in  a  small  country  like  Switzerland,  justly 
proud  of  its  lofty  public  morale,  the  same  phenomena 
occur. 

In  Switzerland  the  I'ederal  Council  modified  plans 
in  favor  of  the  I'^ederal  railway  employees,  which  had 
been  carefully  worked  out  by  the  general  manage- 
ment, in  order  to  make  these  same  empk)yees  addi- 
tional concessions:  anil  these  concessions  have  been 
still  further  increased  by  the  Chambers.  Salaries  have 
been  raised  and  all  sorts  of  advantages  multiplied. 
Hours  of  labor  have  been  decreased,  and  all  without 
any  useful  result.^ 

Th'"  day  on  which  the  French  government  bought 
the  Western  railway  augured  an  inevitable  strike  on 
the  railroad.  It  wa.-,  well  known  that  the  government 
had  been  unable  to  maintain  discipline  among  the  male 

'  Th.  Favarger,  Situation  dcs  Chcmins  de  Fcr  Fcderaux  en 
Suisse.  Journal  dfs  Hionomistes.  December,  igio,  Rapport  de  la 
Commission  du  Conscil  National,   igog. 

326 


LABOR 


I 


and  female  enipldvees  in  the  tobacco  factories.  It 
had  CDiiif  to  tcrtiis  witli  the  etiiployecs  of  the  match 
fact<»ries  only  hy  the  lielp  of  one  ari:;iiment  :  "Strike 
if  you  hke:  there  is  more  profit  for  us  in  buyinj^j 
matches  abroad  tlian  in  manufacturintj  them.'"  It 
was  known  also  that  anarchy  was  rampant  amonj; 
the  employees  in  the  navy  yards.  Xevertheless.  and 
with  such  experiences  behind  it.  the  p^overnment  dared 
to  assume  the  manap;ement  of  60.000  new  employees. 

To  brinfT  pressure  to  bear  ui)on  the  minister,  the 
general  manager  and  the  directors  of  the  various 
branches  of  the  railway  service,  the  railway  employees 
would  now  have  their  increased  number,  their  quality 
of  electors,  their  syndicalist  organization  and  their 
own  deputies,  anxious  to  obtain  office  by  the  help 
of  the  labor  vote.  How  could  the  general  mana- 
ger and  the  directors  of  the  different  branches  of  the 
service  be  expected  to  resist  this  pressure?  And,  if 
they  should  so  resist,  would  not  the  minister  be  the 
first  to  say:     "Don't  get  into  a  row"  ? 

The  employees  of  the  Western  railway  cherished 
the  most  extraordinary  delusions  concerning  what 
they  were  going  to  get  out  of  its  seizure  by  the  state 
One  department  head  remarked  to  one  of  the  dispos- 
sessed private  owners:  "I  have  had  only  the  pleasant- 
est  relations  with  you ;  nevertheless,  I  cannot  hide 
from  you  the  fact  tiiat  1  am  enchanted  with  this  pur- 
chase, because  my  power  of  appointment  will  be  there- 
by doubled." 

If  one  department  head  deluded  himself  \v  such 
fashion  it  may  be  easily  judged  what  went  on  m  the 
minds  of  his  subordinates.      And  what  bitter  disap- 

327 


WIIKKI.    ANM)    WHY    nlU.IC    OWNKKSllII'    li 


I.F.D 


iK.iiiliucnts  have  rcMiltiiP  Whs  .!mc>  iMt  tli>'  >^tatc 
which  IS  .Ml  ru-h  ,t,nvi'  fvcTNtlmii;  tliat  i-^  <li-MriiiiU-(l  of 
It?  The  ^'(ivcTUHUiit  railway  was  tlie  slartini;  point 
Mt  the  strike  oi   U)\o. 

As  an  illustratinn  of  this  attitmle  of  the  whole  hodv 
of  eniplovees  take  the  f(.llowiii<,'  series  of  incidents: 
M,  Renault,  an  employee  attached  to  the  mam  olTice 
of  the  railway,  pul)lishe<l  a  manual  of  saljotage,  in 
which  the  following  declaration  a])])ears: 

"We  must  choose  comrades  among  the  professional 
workmen  who,  on  account  of  their  familiarity  with  the 
work,  ran,  hy  a  single  blow,  put  out  of  commission  for 
a  number  of  days  the  equipment  indispensable  to  the 
(.;.cration  of  the  service  as  well  as  to  the  running  of  the 
trains." 

The  minister  called  together  a  committee  of  inves- 
tigation into  the  conduct  of  Renault,  composed  of 
ten  members  representing  the  management,  and  ten 
members  elected  by  the  em])loyees  and  laborers,  under 
the  presidency  of  M.  Vienot.  assistant  tnanager  of 
the  compimy.  The  ten  members  representing  the  em- 
ployees drew  up  a  resolution  declaring  that  M.  Re- 
nault had  done  no  more  than  express  their  opinion. 

They  rejected  the  proposal  to  strike  the  name  of 
M.  Renault  -iff  the  list  of  tmi)loyces,  whde  the  ten 
members  representing  the  directorate  voted  in  favor. 
The  vote  of  the  chairman  decided  the  question.  If  not 
a  single  employee  had  taken  his  seat  the  result  would 
have  been  the  same.' 

'Yves  Guyot.  Lfs  Chemins  de  Per  et  la  Gth'e,  iqil. 

328 


LABOR 

The  chief  weapon  «.f  the-  emiiloyees  of  governmjnt 
nn.k-rtaki.ms  .>  ih':  tear  which  they  'usp.re  in  their 
nn.ncHhatc  suiH-n..rs  ..f  hciuK'  called  to  account  by  depu- 
ties and  senators  together  with  the  intluence  of  these 
same  deputies  and  senators  upon  their  coller^nus  and 
up„n  the  mnusters.      Nor  ,s  the  use  of  this  weapnu 

concealed.  ,    ,  ,   ■      n     • 

.\  congre-  of  raihvav  men  was  held  in  Pans  on 
the  2nd  and  ^nl  of  Apr.l,  .0.2.  presided  over  by  M. 
Barbier.  of  the  government  railway  system.  Durini,' 
the  course  of  the  disc  .sion  anr,ther  employee  of  the 
government  railways.  M.  Leguen.  remaiked: 

"If  all  public  services  were  properly  organized  wc 
should  be  forced  to  form  a  federation  of  all  the  em- 
ployees of  the  government,  when  we  would  become  an 

immense   force.  .         -i     ^^   u^^ 

"Our  syndicalist  action  upon  the  state  railroad  has 
already  l.een  recognized.  Nothing  is  done  without  noti- 
fying the  section  commiitee  concerned.  We  have  won  a 
footing  in  the  house.  Do  your  companies  allow  you  as 
much?    Just  this  foothold  alone  would  suffice." 

Nationalization  of  all  the  railways  was  voted  al- 
most unanimously  and  upon  the  spot.  It  was  decided 
that  action  should  be  begun  with  the  Orleans  road. 
Moreover,  the  congress  determined  to  do  its  utmost 
in  order  that  the  organization,  not  only  of  the  present 
state  system,  but  also  of  systems  to  be  acquired  m  the 
future,  should  insure  to  the  employees  themselves  a 
share  in  the  adnnnistration  and  management  to  which 
they  contend  they  have  a  right. 

?,2() 


WMKKK    AM>    WHY    I'UBLIC    DWNERSHIP    HAS    FAILED 


I.ahorophohia  has  been  raging  among  the  employees 
'it  the  government  railways,  and  is  beccjuiing  slill 
more  aggravated:  474,000  sick  days  in  1900;  656,- 
000  in  i(;i  I  ;  36,816  employees  out  of  67,967,  or  54 
per  cent.,  obtained  leaves  oi  absence  with  full  salary 
under  the  same   pretext. 

The  employees  ()f  the  government  railways  do  not 
^how  the  smallest  gratitude  for  the  c<")ncessions  made 
ihem.  Before  the  Congress  of  the  Xational  Associa- 
tion of  Railways  M.  Berthelot  deolnred  that  such  con- 
ce.-sions  had  been  obtained  "through  syndicalist  action 
and  the  strike."  ' 

Under  the  system  of  automatic  promotion,  the  en- 
gineer founfl  guilty  of  the  wreck  of  ^urville,  a  man 
who  had  been  repeatedly  punished  .or  intoxication, 
has  been  [)romoted  to  a  higher  pf)sition.  Agai  the 
fact  that  a  man  like  M.  (loude.  now  deputy,  was  re- 
tained in  the  navy  yard  at  Brest,  is  another  clear 
proof  of  the  state  of  anarchy  which  exists  among  the 
employees  of  the  Navy.  Still  another  encouraging 
feature  in  connection  with  our  naval  employees  is 
the  fa  t  that  these  workmen,  who  live  only  for  and 
by  preparations  for  war,  are  peace  at  any  price  men. 
In  iQi2,  during  the  discussion  regarding  the  naval 
prograr  1,  M.  Goude  demanded  that  the  number  of 
laborers  in  the  navy  arsenals  be  increased ;  that  the 
number  so  increased  should  remain  fixed,  and  that 
armaments  be  diminished. 

The  following  story  was  told  me  a  few  years  ago 
liy  a  naval  olTicer  of  high  rank : 

^  Le  Temps.  April  4,  1912. 


LABOR 


"A  certain  laborer  employed  in  the  navy  yard  at 
Brest  presented  himself  with  all  formality  before  his 
commanding  officer.  He  f^ave  the  correct  military  salute, 
tonchin<^  his  cap  with  the  back  of  his  hand  with  his  open 
palm  toward  the  admiral,  rpon  tlie  palm,  however,  was 
written  in  lar.e^e  letters  a  most  tlapjrant  personal  insult 
which  the  admiral  pretended  not  to  see." 

1-rom  the  moment  that  the  salary  question  ceases  to 
be  ref:;ulated  nv  net  cost  and  becomes  dependent  solely 
upon  the  amount  of  pressure  to  he  exerted  ujion  repre- 
sentatives entrusted  with  the  di-^tribution  of  the  public 
resources,  salaries  will  have  no  other  limit  than  the 
force  of  resistance  of  these  same  representatives,  or 
the  exhaustion  of  the  budg^et. 

^n  1912  the  city  of  Paris  was  asked  for  an  increase 
01  the  so-called  residence  subsidy — an  additional 
amount  of  money  beside  the  rei,ailar  salary  to  partially 
cover  the  cost  of  rent — granted  to  the  teachers  of  the 
city.  Such  an  appropriation  would  involve  a  general 
increase  of  200  francs  for  each  member  of  the  entire 
teaching  force.  Several  other  concessions  were  also 
demanded,  which  would  retjuire  a  modification  of 
the  law  of  July  19.  1S89,  and  of  the  decree  of  April 
20,  1892,*  Let  me  quote  the  threatening  terms  in 
which  one  of  these  teachers — a  certain  M.  Kscudie — 
addressed  the  Munic.pal  Coimcil  in  the  Bulletin  de 
I' Association  des  Ancicns  Elcves  de  l'£colc  Normale 
d    ' J  Seine: 

*  In  the  four  months  allowed  the  Prefect  to  answer 
our   petition    it    is    incumbent   upon    the    department    of 

'  Report  of  M.  Rebullard,  Municipal  Council  of  Paris,  1912, 
No.  ;. 


WHERE    AND    WHY    PUBLIC    OWNERSHIP    HAS    FAILED 

Education  and  the  Municipal  Council  to  prove  their  good 
will  tinvard  us  by  adopting  a  comprehensive  plan  of 
increase.  If  our  very  modest  demands  are  admitted,  in 
a  word,  if  every  instructor  is  given  the  immediate  cer- 
tainty of  seeing  his  situation  improved  before  the  age 
of  55  years,  this  campaign  will  utterly  cease.  Rut  at 
the  present  time,  and  I  insist  upon  this,  the  Department 
and  the  Municipal  Council  alone  have  the  power  to  put  a 
final  stop  to  further  action  on  our  part." 


ir.' 

ri!. 


In  1905,  following  a  disagreement  with  the  Federa- 
tion of  Friends  (Federation  des  Amicales),  whose 
demands  they  judged  too  moderate,  the  Teachers' 
Union  was  organized.  It  is  certain  that  in  so  doing 
no  reference  was  made  to  either  the  letter  or  the 
spirit  of  the  law  of  1884.  Nevertheless,  on  Novem- 
ber 7,  1005,  the  Chamber  of  Deputies  decided  not  U) 
prosecute  the  existing  union,  declaring  that  all  that  was 
necessary  was  to  forbid  the  .'<  .  mation  of  new  unions 
until  a  vote  had  been  taken  on  the  bill  concerning 
the  status  of  government  employees.  The  new  union 
paid  no  attention  to  anything  except  the  first  part  of 
this  decision,  and,  on  the  7th  of  November,  it 
launched  a  manifesto  declaring  that  its  members  wished 
to  become  associated  with  the  Workmen's  Exchange 
and  to  belong  U>  the  General  Labor  Confederation. 
The  manifesto  concluded  with  these  words: 


iH 


!- 


"The  new  union  must  be  ready  to  furnish  a  basis  for 
future  autonomous  organizations  to  which  the  govern- 
ment will  commit  the  duty  of  managing,  under  its  and 
their  reciprocal  regulation,  a  socialized  public  service." 


;■?: 


LABOR 

At  a  congress  hold  at  Chamln'ry.  in  the  month  of 
August,  i«)i-',  50  unions  were  represented,  at  which 
the  princii)le  of' the  amalgamation  of  teachers  and  la- 
borers was  endorsed  and  the  following  sentiment  de- 
clared : 

"Our  relations  with  the  government  as  an  employer 
are  no  different  from  those  of  any  employee  toward 
his  employer,  and  we  ought  to  have,  as  agamst  our  em- 
ployer, the  same  rights  that  any  employee  has  as  agamst 
his.  Such  employees  have  their  unions  to  protect  them; 
therefore  we  ought  also  to  have  ours." 

From  the  standpoint  of  salary  a  "syndicalist  rate" 
ought  to  be  established,  declared  one  delegate;  and  the 
congress  so  voted.  The  suppression  of  any  method 
of  promotion  except  that  founded  on  length  of  service 
was  also  vcUed.  a  prenV.uni  being  thus  put  on  indiffer- 
ence and  inetYiciency.  . 

Finally  the  Congress  resolved  upon  "an  effective 
representation  of  the  Teachers'  Union  at  the  ne.xt  con- 
gress of  the  (".eneral  Labor  Confederation,  at  Havre, 
in  order  to  emphasize  more  and  more  its  attachment 
to  the  organized  working  classes."  '  and  adjourned 
after  singing  the  •Tnternationale."  - 

Many\if  the  members  of  this  Congress  were  district 
counciliors.  and  hence  representatives  of  the  majority 
„f  their  colleagues,  thus  showing  how  far  they  were 
willing  to  go  in  taking  advantage  of  the  g»).)d  nature 
and  weakness  of  ministers  and  members  of  Parlia- 
ment. 


'  U  Temps.  August  iq,  I9'2. 
'The  Socialist  hymn. 


.^.^3 


WHERE   AND    WHY    PUBLIC    OWNERSHIP    HAS    FAILED 

Unfortunately  for  the  teachers  they  went  further 
than  the  I'oincarc  luinistry  was  wiHing  to  tollow.  On 
the  rcassenibhng  of  the  ministry,  on  the  22nd  of  Au- 
gust it  was  decided  to  (h'ssolve  the  Teacliers"  I'nion. 
'Jlie  representatives  of  the  union  have  declared,  how- 
ever, that  they  will  resist  dissolution. 

.M.  (iuisfhau  alone  has  sulnnitlcd  his  case  to  the 
courts,  which  are  thus  rec^uired  to  decide  concerning 
the  legality  of  teachers'  associations.  While  await- 
ing the  decision  the  representatives  of  the  unions  de- 
fied the  minister,  and  their  general  secretary,  M.  Chal- 
opiu.  went  to  preside  over  the  meetings  of  the  con- 
gress of  the  General  Labor  Confederation  held  at 
Havre. 

Up  to  the  present,  June,  1913.  nothing  serious  has 
yet  been  done  The  threat  alone  has  been  sufficient  to 
make  tlie  school  teachers  keep  the  peace  to  a  certain 
extent. 

Many  teachers  destined  to  form  the  manners  of  the 
new  generation  stand  -n  great  need  of  reforming 
their  own.  But  is  it  upon  them  that  the  responsi- 
bility for  such  acts  as  those  just  described  above  should 
fall?  Should  it  not  rather  fall  upon  the  parrot-like 
training  of  the  normal  schools,  which  teaches  pupils 
to  recite  socialist  or  anarchist  formulas  as  they  recite 
phrases  from  their  text-books? 


The  Congress  of  Railway  Mechanics  has  put  on 
record  its  sympathy  with  the  teachers  by  voting  a 
resolution  "protesting  against  this  show  of  govern- 
mental despotism."  .Afterward  its  delegates  presented 
themselves  before  the  minister  of  Public  Works,  who 

.534 


LABOR 


^vas  weak  enough  to  receive  them,  according  to  the 
following  note,  published  ui  Lc  Temps  of  August  24: 

"The  delegation  put  numerous  questions  to  the  min- 
ister, especially  in  regard  to  the  reinstatement  of  em- 
ployees dismissed  during  the  strike  of  1910,  and  concern- 
ing their  eventual  reincorporation  in  the  state  railway 
system.  The  numhers  insisted  that  the  pensions,  allow- 
ances and  other  advantages  previously  granted  by  the 
railwav  companies  to  these  dismissed  employees  be  re- 
computed in  conformity  with  the  provisions  of  the  laws 
of  1909  and  191 1. 

"The  minister  requested  the  delegation  to  formulate 
each  of  their  claims  in  writing,  promising  to  examine 
them  with  the  greatest  care." 

This  is  indeed  admirable !  The  Railway  Department 
had  been  weak  enough  to  give  the  dismissed  employees 
pensions  to  which  they  had  no  right;  but  that  was 
not  sufficient.  They  wanted  more;  and,  when  their 
pensions  are  regulated  to  suit  them,  they  will  be  rein- 
stated into  the  government  railway  system,  where  they 
can  organize  strikes  at  their  ease,  while  saying  to  their 
comrades:  "You  see,  we  have  everything  to  gain, 
and  nothing  to  lose,  by  a  strike!" 

Toward  the  beginning  of  191 2,  a  school  teacher, 
M.  Leger,  on  account  of  disciplinary  punishment 
meted  out  to  a  teacher,  threatened  his  immediate  su- 
perior. 

A  sub-agent  in  the  Posfoffice.  M.  Bouderis.  brought 
before  a  council  of  discipline  to  be  dismissed  for  sign- 
ing a  placard  addressed  to  "the  Public,"  appealed  for 

335 


\vrn:RF,   wd  why   imiiu.ic  ownkrship  has  iailki) 

prntcctidii  tc  the  (.'iitirf  lnnly  of  q. i\iTnin',iil  cin;iHiyccs. 
The  fnilaillc  SyiuHailisli-  (l.iiincil  that  li.-  i-m!,!  1  imt  he 
prosecuted  heeause  he  had  acted  a>  secretary  ot  a 
union. 

A  rural  guard,  named  Carre,  professed  ami-mili- 
tarism. If  his  actions  were  in  accordance  with  his 
talk  he  would  refuse  all  military  dutv.  Xeverlheless 
the  syndicali.'■.^s  e.xclaim :  "Don't  interfere  with  the 
employees  of  the  state  railroads,  who  are  teaching  the 
theory  of  sabotage." 

Under  the  name  of  Friendly  As.sociation  (Associa- 
tion Amicale )  the  policemen  of  Paris  have  organized 
a  mutual  henefit  society,  the  officers  of  which  are  the 
higher  salaried  employees  of  the  Police  department — 
or  even  officials  not  belonging  to  that  organization. 
One  (jf  its  presidents  was  M.  Vel  Durand.  former 
])refect  of  the  department  of  the  North,  and  afterward 
councillor  of  state.  livery  year  the  prefect  comes  to 
preside  over  the  annual  meeting.  He  frecjuently  brings 
other  mini'>ters  with  him. 

I'nder  the  circumstances  it  was  easy  to  foresee  what 
has  since  actually  happened.  A  movement  was  organ- 
ized in  the  association  to  transform  it  into  an  active 
"syndicat."  In  Deniuber,  191  i.  they  presented  their 
claim:  Suppression  of  peace  officers,  suppression  of 
the  ordinances. 

The  ministers,  however,  realized  that  the  prefect  of 
police  could  hardly  take  orders  from  a  "syndicat"  of 
policemen.  Whereupon  the  "syndicat"  ajjpealed  to  the 
Executive  Committee  of  the  Radical  and  Radical  So- 


h: 


I,  \IU)K 

cialist  party,  wIkjsc  vicc-])resi(lt"iit  accoiiipanii  ■!  I-y  lii^. 
cnllca,mies  went  and  prcsicU'il  over  a  niectinj:^  of  police- 
men or<;anize(l  against  the  government  at  a  time  when 
tlie  minister  in  power  wa^  represent  iig  that  same  Kaih- 
cal  and  Radical  S(jci.''Mst  party. 

At  the  National  Printing  Office  an  attempt  was 
made  to  form  a  limited  joint  stock  cmiipanw  with 
M.  Boudet  as  director.  As  it  hatl  1'  .1  pul)lished 
broadcast  that  he  belonged  to  the  lieneral  Labor  Con- 
federation, he  hastened  to  correct  the  nii^iake.  He 
was  affiliated  with  the  twenty-first  section  of  th  ■ 
Livre,^  a  branch  of  the  Federation  of  the  Livre,  which 
was  represented  in  the  (k'neral  Labor  Confederation. 

Now  the  General  Labor  Confederation  has  for  its 
creed :  Direct  acticjn.  Consetjuently  the  F"ederation 
of  the  Livre  must  endorse  it. 


The  subordinate  officials  of  the  Postal,  Telegraph, 
and  Telephone  department  h,  e  organized  many 
strikes.  They  have  dragged  their  chiefs  through  the 
mud ;  they  have  launched  insults  against  the  ministers 
and  Parliament.  There  have  been  practically  no  re- 
taliations for  this  course  of  action  on  the  part  of  the 
government,  and,  if  there  have  been  any  victims,  they 
have  not  been  hurt  much. 

Indeed,  it  is  astounding  to  observe  the  utter  lack  if 
conscience  with  which  jjublic  employees,  who  have 
begged  to  enter  the  government  service,  knowing  the 
conditions  which  they  were  accepting,  and  who  have 

'  An  association  of  employees  engaged  in  the  preparation  of 
the  Register  of  the  National  Debt. 

337 


WIIIKK    AMI    Win'     I'lIM.IC    OWNKKSHIf    HAS    I'AIl.r.l) 

riTcived  so  many  advantages  ii])on  which  they  had  no 
rij^lit  to  count,  have  thought  theinsel\c>  justified  in 
interrui>ting  this  service  at  their  pleasure.' 

Such  or  such  an  employee  is  punished  hecause  he 
has  hurled  an  insult  or  a  threat  ag;iinst  his  chiefs. 
He  appeals  on  the  spot  to  "liberty  ol'  o])inion."  If  he 
considers  outra;4e  and  denunciation  opiii  ns,  he  only 
jjroves  the  crying  need  of  reform  in  our  elementary 
instruction.  lUit  among  those  who  confuse  these  terms 
are  teachers  them>elves. 

(Governments  themselves  persist  in  destroying  all 
spirit  of  discipline  among  government  empkjyees. 
In  Austria,  in  191 1.  a  number  of  deputies  jjroposeJ  an 
increase  of  ^S.ooo.cx^o  crowns  for  the  railroad  em- 
ployees. The  minister,  despite  his  earnest  desire  to 
satisfy  them,  could  agree  to  only  J r. 000, 000  crowns. 

Then  what  happened?  The  discontented  employees, 
bitterly  resenting  this  grant  of  only  21,000,000  out  of 
the  e.xpected  _^(S, 000,000  crowns,  and  well  aware  that 
♦here  are  more  generous  men  in  power,  brought  all 
])osxible  j)ressure  to  bear.  Meantime  they  made  threats 
against  those  deputies  who  were  not  disposed  to  keep 
on  giving  them  more. 


12.  Despite  facts  clearly  set  forth  by  Gustave 
Schelle,  who,  as  honorary  director  of  the  ministry  of 
Public  Works,  is  thoroughly  familiar  with  public  ac- 
counting, the  i)artisans  of  nationalization  and  munici- 
palization still  continue  to  talk  of  "industrial  budgets." 
Marcel  Sembal.  who  reported  (ju  the  postal,  tele- 
'  Yvts  Guyot,  Les  Chetuins  de  rer  et  la  Greve.   loii. 

338 


LABOR 


i^raph  and  telephone  budj^i'l,  (U-clarcd  that  I'vcrytliiiiL: 
will  be  set  financially  rif,dit  cm  the  day  when  this  hud- 
,<,^et  becomes  an  industrial  bud.^et.  l-'mployees  of 
the  department  have  declared  on  divers  occasions 
that  the  budget  is  their  concern  solely  and  that  they 
have  a  rit,'ht  to  its  profits.  Pnit  h<iw  alxiut  the  losses' 
If  there  is  a  loss  will  the-^e  employees  feel  themselves 
responsible  for  that  also? 

Numa  Droz,  in  a  pamphet  combating  the  purchase 
of  the  Swiss  railroads,  says:  "The  employees  will 
become  accustomed  tcj  considering  the  railways  as 
belonging  before  all  else  to  themselves,  as  a  field  cul- 
tivated  by  them,  and  from  which  the  profits  should 
revert  to  them  in  the  first  instance." 

In  1909,  at  the  Federal  Congress  of  Mechanics  and 
l-'iremen,  one  delegate  cried:  "'The  government  as 
an  employer  is  inca])able  of  managing  a  railway  syb- 
tem."  This  opinion,  nourished  with  great  care  by 
Socialists  like  M.  Sembat.  and  by  the  partisans  of 
public  operation  generally,  is  i)roclaiiiie(l  with  the  great- 
est naivete  :  Any  undertaking  is  rightfully  the  property 
of  its  employees.  The  management  should  be  in  their 
hands.     They  will  operate  it  for  their  own  benefit. 

In  their  manifestos  and  in  their  platforms  Social- 
ists are  accustomed  to  refer  to  ministers  as  incompe- 
tents who  "have  never  done  a  hard  day's  work  with 
their  hands  in  their  lives."  In  other  words,  a  director 
of  Government  Railways,  for  example,  ought  to  be  an 
experienced  locomotive  engineer,  and  a  minister  of 
Public  Works  at  the  very  least  a  switchman,  in  order 
to  justify  their  right  to  their  positions. 

339 


will  Kl, 


\M)    \\\i\     IM    lll.h     WW  Ni-.K.-HIl'     11  A-    1-AlLEI) 


Hv  a  decree  of  June  -'6,  igi  i,  thi-  Xational  I'rintitig 
Office  was  reorganized.  The  workmen.  how(,\or,  wire 
dissatisfied.  Tliey  had  worked  out  an  or,i.,'anizatioii  >\ 
their  own.  They  wanted  a  lahor  niana.yeinent.  hut  witli 
"due  respect  for  the  e.\istin>;  aulMiiMiuy  in  the  organi- 
zation of  each  puhhc  departnient." 

During  a  iiicetin.u;  at  tlic  Labor  I'".\chaiii,u'  the  em- 
ployees of  the  Xational  I'riiUin-  Office  adopted  the 
following  resolution,  which  deserve'.  h<  In-  (juoted.  he- 
cause  it  shows  their  demands  in  all  the^r  ^rudity ; 


"In  consideration  of  the  fact  that  f(  •   many     cars  the 
management  has  nut  been  able  to  opi-'ate  tlic   National 
I'rinting   Press   in   an   inclustiially    sali> factory   manner; 
liiat    the    attacks    on    our    establishment    before    I'arlia 
mcnt  and  in  the  press  arc  juslitied  by  the    lisorganiza- 
lion    of    the    various    dci)artnK!it^,    and    by    ibc    genera! 
confusion,  with  fatal  results,  due  to  the  incompetence  of 
the   heads;   that   a   serious   prejudice   has    been   aroused 
against  the  government  among  the  employees  and  tax- 
payers by  the  discredit  passed  upon  the  establishment; 
and  that,  finally,  the  enormous  amount   of  general  ex- 
j)enditures  is  the  sole  explanation  of  the  increase  of  net 
cost,  all  these  facts  have  persuaded  us  to  substitute  for 
the   present    administrative   regime   an    organized    laljor 
.•idministration ;   to    rei)lace    inefficient   and    disinterested 
officials    by    respoT^il)le    and    interested    producers;    to 
create  a  central  ort,^anization  coordinate  throughout  its 
parts;  to  give  to  the   undcrtakins^  a  management  co- i- 
posed  entirely  of  workers ;  to  bring  to  the  attention  of 
tlie  minister  of  I'inance  and  oilier  public  authorities  the 
said  plan  of  administration:  and  to  take  such  steps  as 
are  needed  to  bring  about  its  adoption." 

340 


LABOR 


Here  we  have  the  j^'re.it  synilicalist  pnif^ram  the 
employees,  officials,  ami  subordinate  niTicials  i)i  the 
I'ostal,  'relc.c;rapli  and  rcltphcjiie  department  as  pro- 
prietors (if  the  ^aul  (lep.iruuent.  and  the  laborers  of  the 
navy  yard^,  witli  M.  (Iniidu  as  their  rejjr'-sentative,  as 
proprnloi^  ot  the  arscn,(l>.  Thi^  proj^nam.  attractive 
thous^h  it  lie  1 1  )r  those  u  lio  are  to  carry  it  out.  is 
scarcely  of  a  nature  \(  increase  the  prestige  of  gov- 
ernnietit  and  municipal  operation.' 

N(ir  does  It  im])ly  direct  public  operation.  It  is 
indirect  i)ul)lic  operation,  because  neither  tjo\  eminent 
nor  municipality  will  manage  the  undertakings  of  the 
ta\i)ayers,  for  whom  such  enter])rises  were  created. 
The  employees  and  laborers  are  going  to  operate  them 
for  their  own  benetit. 

As  a  matter  of  fact,  the  whole  question  is  one  of 
putting  into  practice  \rticle  li  "\  the  program  of  the 
Congress  at  Havre,  in  1880,  drawn  u])  by  Karl  Marx, 
and  pr   -rented  by  Jules  * '.uesde.-'     It  i>  thus  wcjrded : 

"The  annulling  of  all  contracts  alienating  public  prop- 
erty (banks,  railways,  mines,  etc  1,  the  operation  of  all 
government  workshops  to  be  contiderl  to  the  men  who 
work  in  them." 

13.  Fr(jm  a  distance  it  would  appear  that  such  a 
regime  might  work  .admirably  ;  to  the  (jmnii)otent  direc- 
tors, control;  to  the  heads  of  dej)artments,  their  pre- 
scribed duties;  to  the  subordinat'-  ot'ticials,  the  head 
clerks,  the  executive  force,  each  his  special  task,  and 
so  the  wheels  would  go  smoothly  nnmd.      Ministers. 

'  Soc  .Appendix  "1'.." 

'Set'  tlie  text  in  Siif>hismi-s  S'i)iia!is.cs  ft  Fails  f^conomique. 
by  ^'vi'S  Guyot,   Paris,  Liljraric  I'".   .-Mean. 


VVHKRK    AND    WHY    ITIU  IC    OW  N'FK^It  IP    MAS    lAll.l  h 

even  j^'nv  'iniiciil-,  ina\  rliaiij^H- ;  tlu-  ;ntivt'  inaiiamiui'iit 
remain^  I  lure  i<  ^oiiu'  tnilli  iii  thi^  Knurptii  iii,  and 
the  I'act^  liavi,-  provrd  it. 

Oiilv  all  iiiaiiaj^U'iiieiit  must  he  carried  on  by  human 
beings,  and  human  beings  have  various  personal  idio- 
syncrasies. They  are  not  all  of  the  same  character, 
and,  in  all  de])artments.  there  are  symi)athies  and  an- 
tipathies. There  are  managers  who  know  how  to  j.(et 
work  done,  and  others  who  'lo  not.  'I'here  is  routine 
and  ne,[,dij.,a'nce.  On  the  ont  hand,  we  have  fear,  hate, 
and  mistrust  of  f^^overnment  and  public:  on  the  other, 
dread  of  responsibility — "don't  raise  a  row."  b'inally, 
there  is  "the  tjood  of  the  service,"  and  from  this  jjoint 
of  view  the  undertaking  becomes  an  end  in  itself. 


The  partisans  of  government  owner  hip  of  the  rail- 
ways are  always  ready  with  this  jjostulate:  "Why  do 
\(iu  think  that  railways  belonging  to  the  government 
will  not  be  as  well  managed  as  private  lines,  when  the 
same  engineers  who  have  managed  the  one  are  to 
manage  the  other?" 

But,  as  M.  Duval- Arnold  '  has  well  said: 

"The  same  engineer  is  a  very  different  individual  ac- 
cording to  whether  he  is  accountable  to  a  private  em- 
ployer or  whether  he  is  employed  by  the  city  of  Paris  ; 
in  this  latter  case  his  work  is  hampered  by  the  constant 
effort  he  must  make  to  keep  out  of  trouble  with  the  Pre- 
fect, with  the  Council,  and,  above  all,  with  the  General 
Labor  Confederation  to  whom  the  employees  under  his 
orders  are  subservient." 

'  Societe  d'ficonomie  Politique,  Journal  des  £conomistes,  De- 
cernber.  1012. 


LABOR 

1    havf  heard  ministers  ..f    riil)lic  Works,   .-n  the 
next     Uiy   after   acTidcnts.   say.    in    rr>i)()nsc    t..   o>m- 
plai.  •    ;      ••\e'-,   things   are   ^oni.i,'   hadly        Idle    man- 
,i'Hi;uiit    ..t    tlu'    ^'nvernmei't    railways    is   deplorahle. 
I'^it    I   am  KMUiii  m  eli:m-e  all  that!"     'idien.  without 
xMiniiii'^    the   -rneral   inana^;cr   ..t    the    Railways,  tlu. 
niin;>ter  ;.n.eeod.  to  di-nii^>  an  important  ofhcial  of 
ihe   government    railways,    t-    ■■vliMm   Uie   -o'.ernmont 
strai'^hluav   awards   a    --mhI   enndnct    me<lal.      Under 
surh'eonditiwn^  what  Im.o  nus  ,,t  the  authority  of  th.- 
manager-      What    re^peet   ear,   he   inspire   in   his  em- 
ploye.-s?      Sueh   ministers,   instead  of  1)rinj,dn,£r  order 
into  the  government  railway  seivice.  arc  playing  fast 
and  loose  with  anarrhy. 

14.  F.verv  government  rir  municipal  enterprise  is 
exposed   to' political  tmthidding  of  one  politician  ])y 

another. 

Authority  slips  from  the  hands  of  the  managetncnt 
in  charge  to  the  deputies  and  luunicipal  councillors,  to 
whom  siu-ii  managers  feel  tlvniselve-  respo.i>ihle.  and 
who  are  nothing  less  than  proxies  of  government 
employees  in  their  attacks  on  the  puhlic  interest. 

Government  employees  hecome  electoral  factors,  so 
much  the  more  im])ortant  in  proportion  to  the^  m- 
crease  of  government  and  municiiial  activities.  They 
become  the  actual  masters  of  those  to  wlmm  in  theory 
they  are  subservient.  'I'his  danger  has  been  strongly 
felt  in  the  government  which  has  h,.d  the  r^iost  com- 
plete experience  with   Socialism— New  Zealand. 

Article  22  of  the  civil  service  reguhtion  reads: 

3-+3 


WIIKRK    AND    WHY     I'UBLIC    OWNERSHIP    HAS    FAILED 

"In  orf'cr  that  employees  of  every  grade  can  be 
counted  iipon  to  render  loyal  and  efficient  service  to  the 
government,  it  i,=  necessary,  and,  moreover,  it  is  ex- 
pressly enjoined  upon  them,  to  take  no  jjart  in  politics 
other  than  through  their  votes  at  elections.  Each  viola- 
tion of  this  article  will  be  met  by  a  penalty  proportioned 
to  the  attendant  circumstances  of  the  act." 


I'l' 


The  railway  regulations  of  1907  conlirm  this  order: 

"Outside  of  their  vote  employees  must  take  no  ac- 
tive i)art  in  politics." 

A  workman  in  the  railway  shops,  J.  A.  McCal- 
lough,  durinr  a  meeting  of  the  Independent  Political 
Labor  League,  in  S"j)ten  her,  1907,  introduced  a  reso- 
lution against  the  ministry  of  War,  and  was  dismissed. 
He  allegeil  as  his  e.xcuse  that  lie  had  been  occupying 
himself  with  politics  for  a  long  time  without  anything 
having  bee;,  said  about  it.  The  Chamber  almost 
unanimously  upheld  the  government,  while  regretting 
its  previous  tolerance.  The  following  comment  ap- 
peared in  the  l-.vcning  Post:  "If  the  state  does  not 
giivcrn  the  employees,  the  employees  will  govern  the 
state."  As  a  matter  of  fact,  the  jiolitical  power  of 
these  servants  of  the  government  is  ast(Miishingly  great. 

In  New  Zealand  54,000  persons  are  directly  de- 
pendent upon  the  state:  with  their  families  they  form 
a  group  of  at  least  130.000  people.  Those  who  de- 
pend more  or  less  indirectly  upon  it  may  be  estimated 
at  a  still  higher  figurt.'  Altogether  such  individuals 
represent  more  than  a  (juarter  <jf  the  entire  populati m. 

Delegates  to  the  British  Trade  I'nions  Congress 
were  received  by  Mr.  Asquith,  I-'ebruary  15,  igi2.   Mr. 

344 


LABOR 

Millard,  rcrescnttaK  Ihc  cn,,loyees  of  the  Postoffice^ 

n..l,t.   of    citizens,   and    cspccally   to   be   ^ ""^"d    to 
slreak  for  or  aga.nst  any  candidate  m  the  leg.slat.ve 

'"Mr""Asc,„ith  ol,.crve.l  that  it  was  hard  to  see  «hy 

postal  etnplovccs  should  he  granted  a  „r,v,lege  re  ,  s« 

o  all  other  •^.overnntcnt  employees,     .\n  emplo  ee  o 

e  Postoffice  nright  vote  for  his  chosen  candidate,  but 

llrought  not  to  he  a  tnetnber  of  an  electoral  co.nnnt- 

'^Mr,  Millar  answered  that  it  was  P'-^'s^'y  'his 
limitation  that  he  and  his  eonstrtucnls  w.shed  to 
rercome       Mr.  .X..|m.h  asked  whon,  he  was  repre- 

""•  Postal  employees  of  the  lower  grades,"  was  the 

'"'Mr    \s<mith-"'.-ou  .tre  asking,  then,  that  Postoffice 
em  ^ovee      .ho  .lo  not  even  pay   the   income   tax, 
tail  liave  a  prdintinarv  voice  in  the  el=c^.ons,- 

r :"T  r   :.><:^  w,".  '<r,,r.  .,<  .^  i  and 

,he  following  declaration    of    Sir    Thomas    Hughes, 
twice  mayor  of  Liverpool : 

"The  day  on  which  a  man  becomes  an  employee  of  a 
n^un^Xal  coloration  he  ought  to  have  no  further  voice 
in  the  choice  of  his  superiors. 

Mr   O    Smith,  town  clerk  of  Birmingham,  has  ex- 

:n    altCgh  with  some  caution,  the  same  senti- 

;;:::;:"  ^^  Mouther,  of  Manchester,  and  the 

345 


WHKRK    AM)    WHY    I'dUU'    OVV  >:  ICKSIII 1'    HAS    lAII.KD 

Lord  Mayor  of  dlasj^ow.   Mr.  S.  Chisli(jlni.  are  also 
of  this  opinion. 

'I  hi  sul^l^rcssion  ,,f  tiw  political  and  rlcrtaral  ri'jhis 
of  all  the  employees  c/  stales  and  nnniiripaiities  is  an. 
indispensable  eonsennenee  of  the  development  of  pub- 
lic otwration  Are  ils  partisans  prepared  to  accept  such 
a  result? 


15.   Rules   lor  tlic  model  .government  employer: 


I.   The  state  sIiouM 


l)e  a  model  employer,  and   it,^ 


generosuy  should  not  lie  liiuited  hy  any  consideration 
for  the  taxpayers.  I'rivate  property  should  he  confis- 
cated for  the  sake  of  collective  ownership  of  all  the 
instruments  of  production,  distrihution  and  e.xchan.j^e. 

2.  To  this  er.(i  tlie  stale  ought  to  emplov  twenty 
employees  where  private  industry  would  use  hut  ten. 

3.  It  ought  to  pay  lOO  francs  of  r  xKary,  where  pri- 
vate industry  would  pay  50.  and  it  .night  to  supple- 
ment the  actual  .salary  hy  full  pay  for  rest  time  and 
vacations,  and  gr'nt  numerous  other  adva-.tages  in 
the  way  of  money  and  privileges  as  well,  without 
counting  free  kxlging. 

4.  It  ought  to  insure  leisure  time  for  workers  by 
always  accepting  shorter  hours  of  work  than  private 
industry  is  jjrepared  to  do. 

5.  It  should  recognize  one's  right  to  be  lazy,  and, 
therefore,  it  ought  to  give  full  pay  tc  all  those  af- 
dicted  with  that  sacred  malady,  laborophobia. 

6.  Employees  should  he  irremovable,  but  they  should 
have  the  right  to  strike. 

7.  The  ma-agement  of  undertakings  belongs  only 

346 


LABOR 

to  the  competent,  or,  in  other  words,  the  employees 
of  the  service. 

8.  The  service  not  being  the  property  of  the  pubhc, 
who  arc  paying  for  it.  but  of  the  emi)loyees,  who 
ought  to  render  it,  its  profits  beh^ng  to  them,  and 
ought  to  be  divided  among  them. 

9.  The  employees,  being  the  rightful  proprietors  of 
the  service,  ouglit  to  be  bound  by  no  other  rule  than 
to  make  use  of  it  for  their  own  best  interests. 

10.  The  model  government  employer,  confiding 
state  undertakings  and  their  operation  to  emp'oyees 
more  or  less  federated,  should  not  only  provide  an  ex- 
ample of  abdication  for  private  employers,  but  it 
should  force  them  to  it  by  the  above  rules,  which  are 
essential  conditions  of  direct  public  ownership. 


^ 


347 


CHAPTER    VI 


THE   CONSUMER 

The  Consumer  of  an  Kxtnrtionate  Monopol'-  I  Without  Re- 
dress.— The  Sole  Remedy;  To  Go  Without. — Water  in 
Paris. — Short  Allowance. — ('io\'ern:  "iit  Matches. — To- 
bacco.—  Deceptions  in  Quantity  and  juality. —  he  •'"on- 
sumer  a  Dependent,  Xot  a  Contracting  'arty. —  'he 
I'ostoflice. —  The  Telephone. —  The  Privilege  of  Pa- 
tience and  Good  Temper  Left  to  Telephone  Sub- 
scribers.— Subscription  Kates  in  F-ance. — The  Tele- 
phone in  Great  E^riiain. — The  Pru.isian  Governnu-iit 
Railway  Lines  Form  a  Trust. — Private  and  Municipal 
F.mploymcnt   Bureaus. 

L  nder  a  regii.ie  of  economic  liberty  the  maniifac- 
turcr  and  the  merchant  need  the  consumer  more  than 
the  consumer  needs  them.  Under  a  monopcjhstic 
regime  the  consumer  has  InU  one  duty — to  suImimi. 
lie  has  but  one  other  recourse- — to  go  with^mt. 

Now,  if  tliere  is  an\  service  which  ought  to  be  pro- 
vided on  a  large  scale  ;i  is  water.  Yet  nearly  every- 
where the  demand  is  greater  than  the  supply.  Paris 
has  always  lagged  liehind.  There  has  scarcely  been  a 
summer  when,  under  one  pretext  or  another,  there  has 
not  l)een  an  interruption  in  the  water  service. 

We  have  become  used  t(j  being  told  that  our  faucets 
will  be  shut  off  during  the  night,  and  that,  it  we  have 
not   taken  proper  precautions,  we  run  the  risk  of  a 

348 


THK    CONSUMER 

temporary  wMer  famine.  If  a  fire  should  b-eak  out 
we  wcniUl  not  have  even  a  pitcher  ot  water  to  extin- 
guish it. 

At  the  same  time  official  warnings  are  incessant 
against  wasting  water— as  though  there  were  a  limit  I'. 
the  .  upplv.  Here  we  have  the  very  (luintessence  of 
monopolv.  Inactive  themselves,  the  municipal  council- 
lors content  themselves  with  interfering  with  the  free- 
dom ot  action  of  others. 

The  employees  of  a  monopoly  through  all  the  de- 
grees of  the  hierarchy  know  their  power  and  use  it. 
We  have  alreadv  seen  this  in  the  case  of  tobacco.^ 
But  let  mc  illustr.ite  by  one  or  t.^'o  other  examples. 

All  those  who  must  use  j^overnment  matches  have 
complained,  not  alone  of  their  quality,  but  even  of 
their  quantity. 

Ten  centime  boxes,  which  bear  upon  their  wrapper, 
"Swedish  matches,  60  matches,"  are  passable,  al- 
though the\  generally  contain  a  certain  number  of 
unintlammable  bits  of  wood.  But  lately,  in  the  coun- 
try, I  have  had  to  content  myself  with  boxes  at  5 
centimes,  bearing  a  label:  "French  matches,  50 
matches." 

I  oh  Tve  that  the  differenve  in  the  cost  of  the 
matches  is  offset  by  a  difference  of  10  matcnes  in  the 
cheaper  box.  or  17  per  cent.  less.  Matches  which 
will  light  are  the  exception. 

Now  please  notice  that  in  our  democratic  country 
these  cheaper  matches  are  provided  for  people  in  poor 

'  See  .ibove,  book  2,  chapter  20. 

349 


fe: 


dll'i 


WHKRE    AND    WHY    ITBI.IC    OWNERSHIP    HAS    FAH.ED 


circunistances.  \\t  llie  dcitartmcnt  is  deceiving  their 
in  regard  \n  ihc  quality  ol  the  goods. 

In  ordrr  to  sell  its  matches,  the  government  rehes 
on  wiiolc^ale  and  part  wholesale  merchants.  I  lie 
first  niu.'-t  hu\  a  sui)i)ly  at  a  minimum  sum  of  20,000 
francs,  and  the  second  at  J. 000  francs.  The  comn.is- 
sion  in  the  fust  case  is  16  per  cent,  and  in  the  second 
14  per  cent.  The  total  profit  from  these  commissions 
is  not  realized  hy  the  merchants,  because  thev  are 
forced  to  pay  commissions  to  groc  -s  and  other  retail 
merchants  up  to  10  per  cent. 

Nevertheless,  small  as  they  were,  the  government 
determined  to  reduce  the  first-mentioned  commis- 
sions, which  it  considered  too  generous,  and  an  order 
of  December  30.  1911.  provided  that,  beginning  with 
h'ebruary  i,  1912,  the  c(Mnmissions  should  not  only  be 
lowered  to  15  and  i j,  per  cent.,  respectively,  but  also 
that  only  those  shall  be  considered  as  wholesale  mer- 
chants who  buy  20,000  francs'  worth  of  matches  at  a 
time,  and  at  lea^^t  125,000  francs'  worth  a  month. 
Against  this  last  condition,  however,  interest  d  parties 
protested,  and  the  director  general  of  indirect  taxes 
(Dircctcur  (Jrnrral  dcs  Contributions  Indirccts)  in- 
formed his  departmental  heads  that  the  order  aforesaid 
would  be  modified  in  regard  to  this  special  point.  The 
number  of  middlemen  was  also  reduced  because,  by 
demanding  large  sums  from  a  few,  the  government 
could  get  along  with  a  much  smaller  number. 

Occasionally  those  who  are  curious  enough  to  in- 
vestigate will  find  that  they  are  being  deceived  as  to 
the  r.urril}jr  of  matche;  in  the  boxes  sold  by  the  govern- 
meni.     Indeed,  after  a  number  of  experiences  of  this 

350 


THE   CONSUMER 

character.  I  have  becoinc  convinced  that  the  i\v\r.xr\- 
ment  looks  upon  the  consumer  not  as  a  contractnig 
party,  but  as  a  beneficiary. 

In  IQ06.  during  several  weeks,  if  not  several 
months,  the  situation  of  the  smoker,  as  described  by 
Lc  Journal,^  was  about  as  follows: 

"Yesterday,  as  I  entered  a  toi)acco  shop,  a  customer 
was  asking  for  a  70-centime  green  package  of  cigarettes. 

"  'We  haven't  any,'  answered  the  dealer. 

"  'Then  give  me  a  pink  package  at  the  same  price.' 

"  'We  are  out  of  those,  too.' 

"The  astonished  customer  glanced  at  the  luxurious  fit- 
tings of  this  large  shop  on  the  boulevard  and  inquired: 

"  'How  do  you  happen  to  be  out  of  the  most  popular 

brands?'  .  , 

'"Because  the  supply  in  the  warehouse  from  wlncH 
we  order  our  tobacco  is  not  large  enough  to  meet  the 
demand.  One  dav  it  is  one  kind  and  another  day  an- 
other which  I  am 'refused.'  added  the  clerk,  shakmg  her 

head.  ,     ,     , 

"As  an  actual  fact,  when  one  kind  of  tobacco  or  cigar- 
ettes is  manufactured  in  a  district,  the  warehouses  and 
their  customers,  the  retailers  in  that  particular  district, 
must  go  without  all  the  otiier  brands. 

'"Idon't  know  where  all  this  will  end,'  continued  the 
clerk  'First  customers  complain,  then  they  become  an- 
gry and  we  can  do  noth.ing  about  it.  And  yet  H  is  too 
bad  to  lose  a  sale  through  the  fault  of  the  manufac- 
turer !'  " 


The  article  terminates  thus: 

*July  30,  1906. 

35T 


VVHKRK    AND    WHY    I'UBLIC    OVVNKRSllIl'    HAS    KAH.KD 

"Many  MccfptioiK  are  romj)Iainc(l  of,  such  as  cijr.ir- 
ettcs  wliirh  unwrap  tlit-  munH'nt  tliev  arc  liirhted.  ovcr- 
nioist  tnlKuxo,  etc.  The  inequality  in  the  weight  of  the 
packages  is  especially  astonishing. 

"One  retailer  weigiieil  a  certain  number  of  packages 
of  ordinary  tobacco  costing  50  centimes.  Instead  of  the 
regulation  weight  of  40  grams,  from  12  to  ^5  grams 
were  found.  It  is  only  fair  to  add.  however,  tliat  there 
were  a  few  weighing  50  -rams  The  purchase  of  a 
lo-sou  package,  therefore,  becomes  a  sort  of  lottery.  This 
state  of  affairs  occurs,  it  seems,  because  there  is  not  time 
to  weigh  the  packages  in  those  pretty  little  patent  scales 
which  are  so  successful  at  world  expositions,  but  of 
which  there  are  altogether  too  few  in  the  tobacco  fac- 
tories." 


F-/e  years  after  the  above  article  was  written  I 
read  in  the  l-igaro  of  August  20,  1912: 

"We  mentioned  day  before  yesterday  the  case  of  a 
user  of  •mild  tolwcco'  from  whom  was  demanded  the 
sum  of  I  franc  for  a  certain  green  package  which  bore, 
on  the  lai)el.  So  centimes.  'That  is  the  old  label.'  was  the 
scornful  answer  to  the  remonstrance  of  the  customer" 

"The  self  sufScience  of  the  state  as  a  merchant,  and 
especially  a  tobacco  merchant,  is  manifested  in  a  number 
of  other  ways.  One  of  our  subscribers,  a  well-known 
business  man,  from  the  district  of  the  Seine  writes  us: 

"'I  am  a  smoker  (unfortunatJv),  bul  \  can  only 
smoke  Maryland,  which  comes  wrapped  in  yellow  paper 
at  I  franc  for  40  grams.  For  some  time  now  I  have 
been  losing  three  packages  oui  o'  f^ve  because  the  major- 
ity of  the  i)ackages  of  Maryland  contain  caporal  supe- 
riciir,  a  tobacco  so  strong  that  I  cannot  smoke  it  In  ad- 
dition to  the  total  loss  of  the  package,  which  I  give  away 

352 


THE    CONSUMER 

to  people  who  can  endure  this  tobacco,  I  am  cheated  in  re- 
gard to  the  price,  since  a  package  of  caporal  supcrieur  is 
sold  for  only  80  centimes  when  it  comes  in  blue  packafjes, 
and,  there fOi-e.  I  am  paying  I  franc  for  the  same  tobacco 
in  a  yellow  wrapper.' 

"'If,  by  c.iance.  I  get  packages  which  really  contain 
Maryland,  I  never  get  the  same  tobacco.  Sometimes  it 
is  light,  sometimes  it  is  brown,  often  it  is  as  black  as  the 
ace  of  spades. 

"  'I  can  show  you  packages  of  Maryland  which  con- 
tain nothing  but  caporal.  .  .  .'" 


"What  merchant  would  dare  to  use  his  customers 
in  such  a  way?"  asks  Figaro. 

No  private  merchant,  certainly,  because  the  dealer 
who  calls  down  upon  himself  the  wrath  of  his  cus- 
tomers is  certain  to  be  ruined.  The  government,  how- 
ever, can  well  afford  to  disregard  its  customer,  the 
public,  whom  the  tobacco  monoix)ly  has  placed  in  its 
power. 

Sometimes,  as  in  the  case  that  I  have  just  quoted, 
there  is  more  than  mere  disregard  of  a  customer,  there 
is  downright  cheating  as  to  the  quality  of  the  mer- 
chandise sold.  Such  an  act  would  expose  a  private 
individual  to  civil  damages  and  even  severer  penalties. 
A  government  can  commit  such  an  offense  with  im- 
punity, for  it  does  not  consider  that  it  is  under  any 
obligation  to  the  consumer. 

Service  order  No.  590,  issued  with  the  best  inten- 
tions by  the  postal  authorities,  illustrates  the  above 
fact  with  amusing  naivete : 

353 


WHIRF.    ANr)    WHY    F'UBLIC    OWNERSHII'     HAS    FAILKO 

''On  a(Ci)iinl  of  tin-  very  considcrafiK'  irinca^o  in  trafTir 
in  ccrlain  section-;  diirinj^  tlic  suninur  sta^on.  it  is  luit 
always  possil)!^  to  k^vp  to  an  aI)sohiteIy  normal  (iMirsc 
in  respect  to  correspondence  of  all  kinds,  despite  rein- 
forcements to  the  overburdened  service.  This  situation 
threatens  to  become  still  further  aggravated  this  '-"ar,  on 
account  of  the  suppression  of  a  very  preat  number  of 
temporary  positions  outside  the  regular  staff  whicli  were 
formerly  di  ;ributed  among  the  different  districts  during 
the  months  of  July,  Augu^-t,  and  September.  There  is 
thus  cause  to  fea-  that  under  these  conditions  letters 
which  ought  alwavs  to  be  transmitted  regidarlv  will  be 
delayed  in  .listribution.  With  a  view  to  offsetting  this 
state  of  allairs,  it  would  seem  e.\])edient  to  devise 
methods  of  causing  the  public  the  least  j)ossible  incon- 
venience. 

"In  order  to  attain  this  object  groups  of  volunteers  will 
be  organized  uj)on  whom  we  may  call,  during  spare  time 
with  pay.  to  sort  out  mail,  the  distribution  of  which  can 
be  delayed  without  imdue  inconvenience,  viz.,  postal  cards 
and  printed  matter." 

Article  J.  f)f  the  decree  organizing  the  postal  service 
declares  that  neither  the  department  n^r  its  einpIuyeeN 
can  he  held  responsible,  .\rticles  i^Sj  and  13S4  of  the 
ci\d  code  are  not  ai)plical)Ie  to  theni.  Article  22  e\- 
l)ressly  stipiilale>  that  the  I 'ostol'tice  cannot  be  hcM 
accoimtahle  for  the  security  of  private  mail. 

In  1905,  on  returning  from  the  I  nitcd  States,  I  re- 
discovered in  Paris  all  the  joys  of  the  government 
telei)hone.  i  rang  up  Central.  .\t  the  end  of  (me  or 
two  minutes  there  was  a  respon.se  of  "Number. 
please."     Then  1  stood  and  listened  to  calls  for  other 

354 


Tin,    CONSUMER 

iuiihIhts,  priv.'itc  convcrsatintis,  etc.,  wink-  waiting  for 
the  oiicrator  {>>  condcsct'inl  to  inform  inc.  "I  hey  do 
not  answer."  in  regard  to  parties  whom  I  knew  had 
|Krmanent  attendants  at  llie  telephone.  Or  perhaps  I 
would  hear  tiie  refrain  "husy,"  a  statement  which,  of 
course,  could  only  be  ventled  afterward.  I  ventured 
to  prf)test.  Instead  of  heuijj;  rewarded  for  patience  I 
was  penalized  for  15  days.  No  nnc  could  reach  me, 
nor  could  1  telephone  anyone.  i''inally,  the  department, 
tormented  hy  the  suhscriher  who  coniplained  so  per- 
sistently, advised  me  to  "(lo  and  see  the  (lutenherg 
exchaui^e."  1  went  to  see  the  ( iutenherj]^  exchange, 
and  there  I  described  the  system  in  the  L'nited  States, 
where,  in  Xew  N'ork,  even  during  the  busy  hours,  you 
can  get  your  party  almost  instantly. 

"  'l)Ut  what  can  you  expect?'  said  the  official  who  ac- 
companied me,  and  whom  1  hajipened  to  have  met  in  New 
York;*'they  iiave  priv.itc  comp.inie-^  in  N'ew  ^'o^k.' 

"  "We  won't  (juarrel  on  that  point ;  hut  the  fact  re- 
mains that  these  i)rivate  companies  accomplish  more 
than  our  government  does.' 

"  'It  would  cost  us  80,000,000  francs  to  introduce  such 
a  system.' 

"  "Isn't  that  a  slightly  exaggerated  figure?' 

"  'We  are  four  years  behind  the  times,  and  yet  you 
comjilain  when  you  have  to  wait  five  minutes.  You  can 
see  for  yourself  how  unreasonable  you  are.'  " 

It  was,  of  course,  perfectly  evident  that  it  was  all 
my  fault  as  well  as  that  of  all  the  other  telephone  sub- 
scribers who  believe  that  the  service  ought  to  be 
prompt. 

355 


I  ^m 


MICROCOPY    RESOLUTION    TEST    CHART 

lANSI  and  ISO  TEST  CHART  No    2 


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Sr*  1653    Easi    Main    Street 

r!=  Rochester.   Ne«    York         14609       USA 

■=  (716)    482  -  0300  -  Phone 

^=  (716)    288  -  5989  -  Fa» 


whkrk  and  why   public  ownership  has   KAILF.I) 

Tn  ^"rancc.  at  any  rate,  the  telephone  is  in  league 
with  ihe  medical  frateriiity  and  the  pharmacists,  be- 
cause it  is  bound  to  bring  on  neurasthenia  in  all  those 
who  have  anything  to  do  with  it.  Presumably  the  Gov- 
ernment is  encouraging  medical  consultation,  the  sale 
of  bromide  of  potassium,  and  patronage  of  certain  hot 
springs. 


At  various  times  I  have  been  able  to  demonstrate 
the  absence  of  responsibility  which  especially  charac- 
terizes government  administration. 

\'ou  f(jllow  religiously  the  directions  prescribed  by 
the  telephone  regulations  in  asking  for  the  manager. 
At  the  psychological  moment  the  operator  cuts  off 
the  connection.  You  may  remain  in  the  booth  for  an 
hour  without  obtaining  an  answer.  liut  let  us  sup- 
pose that,  as  a  great  concession,  yen;  do  get  a  manager. 
The  lady's  first  impulse  is  to  put  you  in  the  wrong. 
She  forces  you  to  submit  to  an  interrogatory,  from 
which  she  invariably  concludes  that  if  you  have  rung 
too  long  without  any  answer;  if  you  have  been  re- 
fused an  answer  after  a  call  which  has  lasted  20  min- 
utes:  if  there  has  been  a  systematic  refusal  to  give  you 
any  connection  at  all;  if  your  wire  was  labeled  "busy" 
when  it  was  not.  you  yourself  are  the  sole  offender. 

If  you  ask  for  the  district  superintendent,  the  first 
im])ulse  of  that  personage  also  is  to  protect  his  admin- 
istration, lie  is  far  less  an.xious  to  account  for  the 
facts  than  to  prove  to  you  how  culpable  you  are. 

I'inally,  if  your  guilt  is  not  clearly  established,  the 
fault  is  laid  to  the  instrument.  An  electrician  will 
speedily  appear  at  your  home  to  repair  your  tLlcph  jiie. 

356 


rni-:  coxsi'mer 
"The  apparatus  is  out  of  order?" 

AO. 


He  smiles,  but  he  makes  a  semblance  of  fixing  some- 
thing. Me  is  an  ac-complice  of  the  operat(jr.  the  man- 
ager and  of  the  department  at  large,  against  the  3ub- 
scriber. 

If  he  were  to  act  otherwise,  his  existence  would  be 
rendered  intolerable. 

At  last  yf)i'  go  till  higher  up.  An  inspector  comes 
to  see  you  at  the  euvi  of  fifteen  days,  and  })roves  dog- 
matically that  whatever  is.  is  right.  As  for  responsi- 
bility, no  one  ever  acknowledges  any.  It  is  either  the 
apparatus  or  the  subscriber  whcj  is  at  fault — unless  it 
be  Parliament,  which  has  not  voted  the  necessary  ap- 
propriations. 

But  the  department  is  cajjable  of  going  still  further. 
It  presumes  to  suspend,  on  its  own  authority,  the 
service  of  certain  subscribers  with  whom  it  is  at  odds. 
It  arnjgates  to  itself  the  right  of  jjunishing  any  indi- 
vidual who  has  paid  for  the  privileges  of  the  telephone. 

Any  telephone  subscriber  wuo  desires  to  socialize 
railways,  banks,  insurance,  alcohol,  sugar,  mines, 
petroleum,  etc..  is  sim])ly  demonstrating  a  natural  lean- 
ing toward  martyrdom.  If  he  has  not  such  an  inclina- 
tion he  is  at  least  incapable  of  understanding  !.he  rela- 
tion of  cause  and  effect.  He  refuses  to  be  taught  by 
experience. 

Wlien  an  individual  hands  over  money  to  another 
individual,  in  order  that  the  latter  tnay  place  at  his 
disposal  the  use  of  any  service,  he  should  have  the  free 
use  of  such  service.     If,  on  the  other  hand,  an  indi- 

357 


wiii:Kr.  AM>  wir.    ri'ULR   owM.KSHii'  has  iah.ki) 


vicinal  accLpts  a  remuneralion  for  rendering  a  service 
which  he  does  not  render,  he  ac(|nires  the  repntalion 
of  a  man  with  whom  it  is  not  safe  to  do  hnsiness,  he- 
canse  he  iloes  not  hold  to  his  contract.  In  a  word, 
he  wonld  he  discredited.  In  open  comjietition  Ins  cus- 
tomers would  turn  from  him  ;ind  go  to  his  rivals.  Or, 
if  self-interest  alone  were  not  strong  enough  to  compel 
him  to  fulfill  his  uhligatit)ns.  the  courts  would  kntnv 
how  to  force  him  to  do  so  by  subjecting  him  t(j  severe 
penalties. 

The  case  of  the  government  is  altogether  different. 
But  at  least,  when  it  has  been  paid  for  certain  services. 
it  should  perform  them  as  faithfully  as  an  individual 
would  d(X  The  following  relatively  recent  occurrence 
proves  that  the  French  (iovernment  at  any  rate  feels 
itself  under  no  such  obligation. 

The  interurban  telephone  is  very  convenient  if  the 
residents  of  the  localities  so  connected  can  succeed  in 
getting  into  communication  with  each  other.  When 
there  was  only  erne  telephone  line  between  Paris  and 
Lille,  satisfactory  communication  was  practically  out 
of  the  questi(jn.  But  the  Chamber  of  Commerce  of 
Lille  was  and  is  both  wealthy  and  prosperous.  There- 
fore, it  said  to  the  government:  "We  are  going  to 
pay  vou  for  the  installation  of  two  additional  lines." 
The  gt)vernment  accepted  the  olter.  But  even  with 
the  two  additional  lines,  u.sers  wishing  to  be  connected 
had  to  submit  to  long  and  exasi)erating  delays. 

Again  the  Chamber  (jf  Commerce  proposed  to  the 
minister  :  "We  are  ready  to  i)ay  for  still  another  addi- 
tional line."  The  trovernment  again  accepted.  Com- 
munication was  scarcely  more  prompt. 

'    358 


THE    CONSUMER 

The  Chamber  ol  Commerce  paid  successively  for 
the  installation  of  two  more  lines,  so  that  in  1907 
Lille  was  connected  with  Paris  by  six  telephone  lines. 
Therefore  Lille  niiiy  be  said  to  have  made  considerable 
sacrifice  in  order  to  insure  telephonic  commu?  '.'ation 
with  Paris.  But  did  it  get  it?  No.  for  the  state  has 
contniued  to  interfere. 

In  the  case  of  strikes,  like  that  at  P.-'s-de-Calais  in 
1906.  there  has  been  complete  suppression  of  private 
telephone  communication.  "The  rights  of  individuals 
must  be  considered  after  the  necessities  of  tne  state." 
This  doctrine  is  all  right  so  far  as  it  goes,  but  ought 
not  such  necessities  to  have  an  end?  And  has  public 
interest  really  demanded  the  supi)ression  of  telephonic 
commimication  between  Paris  and  Lille? 

There  has  been,  as  a  matter  of  fact,  no  occurrence 
whatever  which  could  make  it  necessary  for  the  state 
to  monopolize  several  of  these  lines;  moreover,  in  the 
month  of  June.  1907.  there  were  no  strikes  on  any  of 
the  lines.  Vet.  when  a  connection  was  called  for,  there 
came  the  same  old  answer  :    "The  line  is  busy." 

"How  many  lines?" 
"Three!" 

"And  the  three  others?  Why  are  they  not  working? 
Are  they  being  repairs  ir" 


No.  but  the  prefects,  the  sub-prefects,  the  em- 
ployees of  the  prefecture  or  of  the  various  depart- 
ments were  using  the  other  lines.  Public  officials  can- 
not wait,  and  therefore  they  press  into  their  service  a 
number  of  the  wires  paid  for  by  the  Chamber  of  Com- 


WriF.RK    AND    WHY    riBLIC    ()\V  NKRSHIP    HAS    FAILED 


mcrcc  at  I.ille  in  order  to  insure  quick  communica- 
tion with  merchants  and  manufacturers. 

This  is  a  tlai^rant  example  of  i,^overnment  methods 
when  it  is  achiiinisterinfj  something?.  1  he  officials  are 
convinced  that  they  represent  higher  interests :  and,  by 
an  often  imconsciou^  deviation  from  strict  honesty, 
they  ac((uire  the  habit  of  covering  with  this  excuse 
acts  which  have  nothing  in  common  with  pubHc  service. 
In  any  case,  they  consider  that  their  business  must  al- 
ways come  first,  and  by  virtue  of  this  conviction  they 
extend,  as  in  this  particular  case,  the  government  pre- 
rogative over  facilities  which  in  truth  were  not  estab- 
lished bv  the  government  and  do  not  belong  to  it.  I 
hope  that  by  this  time  this  condition  of  affairs  has 
been  somewhat  improved. 

Moreover,  while  the  state  is  demonstrating  this  self- 
complacent  attitude  toward  the  public,  it  demands  the 
utmost  deference  on  the  part  of  subscribers.  At  the 
slightest  act  of  disrespect,  it  constitutes  itself  at  one 
and  the  same  time  legislator,  judge  and  executioner 
for  the  punishment  of  the  offender,  as  in  the  case  of 
Mile.  Sylviac. 

The  department,  in  order  to  punish  her  for  having, 
as  it  declared,  addressed  a  telephone  operator  offen- 
sively, deprived  her  of  the  use  of  the  telephone  for  sev- 
enteen days.  Meanwhile  her  subscription  ran  on,  and 
thus  the  lady  was  paying  for  a  service  which  was  being 
refused  her. 

She  summoned  the  minister  responsible  for  the  de- 
partment concerned  to  apjiear  in  court,  where  she  de- 
manded to  be  at  least  reimbursed  for  her  subscription 
during   the    seventeen    da^s    when    she    was    refused 

360 


THE   CONSUMER 


service.  In  the  case  of  a  private  company  she  might 
have  demanded  damages  in  addition  and  the  judges 
would  have  decided  in  her  favor. 

But  the  government  is  not  subject  to  judicial  decree 
hkc  all  the  rest  of  the  world,  and  it  has  all  sorts  of 
defenses  behind  which  to  shelter  itself  ai^ainst  indi- 
viduals. It  declared  the  court  incompetent  to  decide 
the  question,  and  the  ccnirt  duly  acknowledged  its  lack 
of  jurisdiction. 

The  Council  of  State,  however,  the  final  court  of 
appeal,  did  not  admit  such  a  plea,  and  we  congratulate 
it.  It  decided  that  the  government,  as  manager  of  the 
telephone  service,  is  a  responsible  agent  and  is  subject 
to  the  jurisdiction  of  the  civil  courts. 

But  the  telephone  department,  instead  of  submit- 
ting, set  up  a  new  difficulty.  It  declared  that  the  case, 
as  concerned  with  taxes,  must  be  decided  not  in  open 
court,  but  on  briefs,  according  to  the  procedure  of  the 
judicial  courts,  under  the  old  political  regime.  Ulti- 
mately the  case  was  decided  against  Mile.  Sylviac. 

Evidentlv  subscribers  to  the  telephone  have  no  other 
rights  or  privileges  than  to  be  patient  and  keep  their 
temper. 

Telephone  subscription  rates  are  extremely  high  in 
France.  In  1907  M.  Gourju,  a  senator,  complained 
of  the  high  rate  which,  at  Lyon,  was  300  francs.  That 
citv  has  3,400  suliscribers.  If  the  number  of  its  sub- 
scribers were  in  proportion  to  those  of  the  five  most 
important  cities  of  Switzerland,  viz.,  (kncva.  Lucerne, 
Berne,  Zurich  and  Basle,  it  should  have  25,000. 

The  assistant  .secretary  of  state  for  the  P<.>stal,  Tele- 
graph and  Telephone  department  has  attempted  to  ex- 

361 


WHKRF.    AND    WHY    PUBLIC    OWNERSHIP    HAS    lAILED 


plain  away  tlic  hiLjli  rate  and  tho  ah'^urdity  inherent 
in  tile  I'act  that  400  francs  must  he  jjaid  m  Paris.  300 
tranes  in  I.Vdn.  and  ^00  francs  in  Marseilles,  at  the 
same  time  assert inj;  that  the  rate  cannot  be  lowered. 
Why?     Ik'cause  there  would  he  too  many  suhscrihers. 

I  nder  a  system  of  free  comi)etition  the  producei- 
^eeks  to  extend  his  clientele  indefinitely.  A  j^overn- 
nient  monoi;oly  looks  for  an  ad\amaye  in  restrictini,^ 
the  nnmher  of  it>  users  and  in  tlie  elevation  of  prices, 
i'he  answer  of  the  assistant  secretary  of  state  only 
i^^'fjes  to  confirm  the  .i^eneral  truth  of  this  rule.  The 
sole  thought  of  the  Telephone  department  has  been  to 
prevent  an  increase  in  the  number  of  subscribers, 
[•".very  subscriber  who  has  dropped  out  has  been  given 
a  hearty  god-speed.  F^ach  new  subscriber  is  an  enemv. 
<  )ne  minister  was  imprudent  enough  to  promise  a  re- 
duction in  rates  from  400  to  300  francs.  What  would 
become  of  the  service  if  the  promise  of  the  budget  had 
been  kept  ?  The  courageous  minister  had  neglccte;! 
to  consult  existing  possibilities;  therefore  the  rate  ha ^ 
been  maintained  at  the  same  figure  down  to  the  present, 
and  the  fear  of  the  subscriber  must  still  persist,  because 
there  are  no  more  suggestions  of  rate  reducti(in. 

And,  anyway,  how  could  the  department  solicit  new 
subscribers  when  it  is  unable  to  assure  service  to  its 
l)resent  subscribers? 

As  a  matter  of  fact  the  department  has  not  the  neces- 
sary equipment.  .\s  a  last  resort  there  are  a[)propria- 
tions.  But  even  when  these  shall  have  been  obtained, 
the  department  will  still  find  itself  in  arrears,  and.  as 
for  a  reduction  in  the  rate,  it  will  not  make  one  for 
fcnr  nf  nn  increase  in  the  number  of  subscribers. 


THE    COXSf.MF.R 


Neither  <]nv^  the  TeU'iihrnie  (lei):irtment  make  any 
eflfnrt  tn  sjive  the  ])uhhe  inaxiniuiu  ^erviee  at  iiimininm 
cost.  Instead  it  restricts  tlie  service  and  pleads  expense 
as  its  defense  at:;ainst  the  influx  of  demand-^  t(!r  tele- 
phone service.  Indeed,  one  senator  has  -one  so  lar  as 
to  sav  that  tht'  postal  and  telegraph  service  in  I'rance 
is  \vnr:;e  than  that  m  any  t'nreii^Mi  country.  Hut  this 
is  too  complete  a  generalization.  In  nio-^t  countries  it 
is  certainlv  worse  than  in  hrance.  If  the  assistant 
secretarv  of  .-tate  had  returneii  a  similar  answer  to  his 
critic  he  umild  have  been  in  tlie  right. 

But  not  at  all.  lie  must  generalize  in  his  turn,  and 
therefore  he  exclaims:  "1  cannot  allow  it  to  be  said 
that  the  jiostal  and  telegraph  service  is  inferior  in 
France  to  that  of  foreign  countries." 

The  tcleiihone  service  was  and  is  still  very  much  bet- 
ter   in    Switzerlaufl.    in    Belgium   and    in    the    United 
States  than  in  1-rance.     W  hen  the  telephone  service  of 
Great   I'ritain  was  transferred   from  i)rivate  manage- 
ment to  that  of  the  i)ostmaster  general.  Lord  Daven- 
port. (lirect<ir  of  the  Port  of  London,  in  a  letter  pub- 
lished in  the  'fimcs  oi  hebruary  12,  191-'.  complained 
that  "the  telephone  service  has  become  imi)Os^ible  and 
commerce   is   suffering   in   conseiiuence.""      1"he    Post- 
master (leneral  did  not  deny  the  accusation.     On  the 
contrary,  he  contented  himself  with  saying  that  "the 
difficulties  in  London  are  tho.se  found  in  all  large  cities. 
and  the  subscribers  can  be  certain  that  the  department 
is  doing  its  best."  ' 

But.  as  the  7';;;u\v  has  observed,  state  operation  of 
the  telephone  has  effected  a  change  for  the  worse  in 
'  Sec   .\ppendix   "C." 


WHERE    AND    W  11  V    I'L  !i!,IC    (AV  NKUSII 1 1'    HAS    lAILKI) 

the  '^ituatinn  of  the  suhscrihcrs.  When  thev  were  de- 
pendent upon  the  Natiniial  'I'elephone  C'dnipany.  the 
complaints  of  suhscrihers  (hd  not  1,^0  to  the  hurcau 
ajjainst  which  they  were  made,  hut  directlv  to  the 
inana,u;enietit  of  the  coni[)any.  P'ornis  were  made  out 
which  could  he  addressed  to  the  manat,'ement.  and  the 
tlfcct  ot  tliese  was  admirahle.  The  operator  knew 
that  any  complaint  would  l)e  followed  hy  a  thorough 
iuvcstiijation.  The  t,^overnment  suppressed  these  com- 
jilaim  forms  and  rejjlaced  them  hy  a  letter.  This  letter 
ha-  provef]  utterly  ineffective.  (The  Times.  F^ehruary 
13.  'V13.  ) 

Social  and  municipal  theorists  are  constantly  receiv- 
ing: '1'it  contradictions  to  their  assertions  regarding  the 
value  of  institutions  fosterefl  hv  them. 

Sometimes  the  consumers  oi  a  government  enter- 
prise stand  in  the  light  of  a  privileged  class,  hut  this 
is  always  a  precarious  position,  hecause  it  is  not  based 
upon  contracts  mutually  agreed  to  and  the  infringe- 
ment of  which  may  he  punished  like  that  of  anv  private 
contract. 

In  1903  the  Belgian  Socialists  boasted  of  the  good 
fortune  of  those  who  patronized  the  Saar  coal  mines 
belonging  to  the  Prussian  govcrnirient.  Paul  Trasen- 
ster.  r^dgian  deinity,  proved,  however,  that  such  eulo- 
giums  were  not  merited.  Later  the  Chamber  of  Com- 
merce at  Saarbriick  brought  to  light  facts  which 
completely  supported  the  deputy's  contention. ^  More- 
over, in  its  report  of  i()03.  the  Chamber  reproached 
the  management  ot  the  fiscal  mines  with  having  pre- 

'  (^rijanc  Industricl.  of  Liege.  August  i,  1903. 


THK    CONSUMER 

vented  any  relief  to  the  iron  ore  industry  by  levying 
exorbitant  rates  (hiring  periods  of  depression. 

\\  hen  the  Saar  mines  passed  into  |)ossession  of  the 
Prussian  state,  about  \^(>^.  it  was  exp'res>ly  understood 
that  every  citizen  should  have  the  ri-lit  to  buy  coal 
But  the  management  of  the  nines,  instead  of  hold- 
ing the  balance  even  between  all  the  coal  dealers  of 
the  district,  granted  a  veritable  inonoi)oly  for  the  sale 
of  it  in  b>ance  U)  two  firm^,  by  granting  them  a  rebate 
of  0.50  marks  per  ton.  l-'or  itself  it  res-  rved  the  ex- 
clusive monopoly  of  supi)lying  in;n  and  steel  works, 
railways  and  gas  companies. 

The  rest  of  the  merchants  of  Saarbruck,  who  help  to 
supply  the  b'rench  market,  have  been  obliged  h>  get 
their  coal  in  Belgium  and  from  the  district  of  l.a  Ruhr, 
and  have  been  the  most  active  agents  in  the  competition 
of  coal  and  Belgian  compressed  fuel  with  the  Saar  coal 
in  Eastern  France. 

Edgard  Mdhaud  (juotcs  the  following  passage  from 
a  study  of  the  German  trust  made  by  Arthur  Ratfalo- 
vich  in  1909.' 

"One  of  the  most  serious  reproaches  that  can  be 
brought  against  the  trusts  is  that  of  preventing  the  full 
and  free  utilization  of  the  sources  of  production.  From 
HjoCt  to  1908  the  Rhenish-Westphalian  coal  company 
produced  67.63  per  cent,  and  55  per  cent,  only  of  the 
visible  supply.  The  potash  trust  succeeded  in  utilizing 
^53  ])er  cent,  of  the  capacity  of  the  various  producing 
centers,  when,  if  their  capacity  had  been  fully  developed, 
the  sale  price  would  have  been  reduced  45  per  cent." 
'  l.'L'.conomic  Publiquc.  November,   iQii. 


wiiKui-.  .\Ni>  urn    im;iii.u    ()\vNl•;K.^llIl'   iia.-i  iailld 

Thoti  ho  coiitludes : 

"Such  arc  the  new  economic  methods  introduced  by 
monopohcs  citlur  national  or  international." 

'I  his  iiKHiiiiKilv  is  iHHlcr  the  iJrotcctmn  nt  the  fj'>\- 
crnnu'nt,  I'.d^arc'  Milliaud  npposes  to  it  "ijuhiic  opera- 
tion as  a  >u])erior  economic  tenet."  lUit  pul)lic  oj)era- 
tion  is  nothinij  hut  a  more  comjjlete  monoi)oly ;  and, 
"far  from  freeing  the  productive  forces  thus  chaired 
and  hound,"  it  would  only  add  a  thick-headed  tyranny 
hoth  ^cornful  antl  lethargic,  as  the  tacts  already  cited 
go  to  prove. 

The  (ierman  government  favors  the  trusts,  while 
Prussia  maintains  that  it  can  limit  their  demands  by  its 
mining  operations.  However,  on  January  u.  1<)12, 
the  l'rus-.ian  govennnetu  abandoned  this  pretense  ana 
capitulated  before  the  Uhenish-W'estphalian  coal  trust 
in  regard  to  W'estphalian  coal.  Production  is  not  to 
be  limited,  but  the  coal  is  to  be  sold  by  the  company. 
The  company  consented  to  decrease  by  a  half  the 
normal  price  foi  coal  and  compressed  fuel  and  by  a 
seventh  the  rate  for  coke.  The  fiscal  mines  will  pay  a 
minimum  (piit  rent  of  6  per  cent.,  while  private  com- 
panies pay  1 2  and  7  per  cent. 

In  1893  I  repealed  the  law  suppressing  private  em- 
plovment  bureaus.  It  was  not  prtjmulgated  again  until 
much  later  March  14,  i<)04,  when  e\ery  municipality 
numbering  more  than  10.000  inhabitants  was  ordered 
to  establish  a  free  emi)loyment  bureau.  I  had  proved 
that  municipalities  could  not  fulfill  this  obligation. 

If  the  law  had  ever  been  put  in  force,  J3X  bureaus 


nil;    CONSUMER 


would  have  had  to  !)<.■  cstahlishfd  iii  these  fities  of 
i().t)00  inhal)itants.  In  kji  "  thr  (  oiDinissioner  of 
Lahor  declared  m  a  circidar  that  iii  i  j,J  of  ihe>e  eilies, 
or  5'  l"-"'"  <-'t'in  .  lli'Te  was  iio  iimiiieiiia!  bureau  m 
operation.  I'or  the  whole  of  Irance,  I'ari^  nicluded. 
the  total  nuuiher  of  i)ositions  liUed  annually  by  public 
employment  bureaus  .-uerat^es  S.s.oa).  According'  to 
the  minister  <jf  Ow  Interior  "•ihe  munieii»al  lUiployuieiit 
bureaus  have  not  aeeomi)lished  that  which  the  govern- 
ment expected  of  them,"  \et  he  had  counted  upon 
them  in  the  hrst  instance  to  compete  witli  private  L..si- 

ness. 

Nevertheless  this  same  minister,  with  superb  op- 
timism, declared  that,  although  the  law  had  faded,  it 
was  not  the  fault  of  the  law.  It  was  not  sufficiently 
complete,  that  was  all.  It  wouUl  be  necessary  to  put 
in  force  the  German  system  which  associates  with  the 
employment  bureaus  the  so-called  Conseils  de  Prud'- 
homm'es.*  This  committee  collects  all  indispensable 
information.  It  deals  with  the  workers  and  ihe  domes- 
tics for  whom  it  has  found  positions  if  they  have  given 
occasion  for  complaints.  In  I'rance,  an  order  of  Octo- 
ber 25,  191 1,  attempted  to  establish  employment  bu- 
reaus on  the  model  oi  the  German  bureaus.  Subsidies 
were  granted  from  that  date  to  bureaus  which  should 
have  fulfilled  the  three  following  conditions : 

1.  They    must    be    under    the    control    of    a    non- 
sectarian  committee  with  a  neutral  presiding  officer 

having  no  vote; 

2.  They  must  continue  their  functions  in  case  of 

'Arbitration    committees,   composed   partly   of   employers    and 
partly  of  workingmen. 


WHERE   AXD    WHY    PUBLIC    OWNERSHIl'    HAS    KAH.i;!) 

Strike  or  lockout,  meanwliile  advising  the  applicants 
that  such  a  conflict  exists ; 

3.  They  must  have  placed  an  average  of  25  appli- 
cants a  month.' 

Presiding  officers  may  be  found  pcrha])s  for  these 
bureaus,  but  will  they  come  to  the  meetings?  What 
will  they  do  there  if  they  do  come?  They  cannot  even 
settle  the  question  between  the  two  parlies  by  a  casting 
vote,  since  they  have  no  vote.  Such  bureaus  will  per- 
haps find  members,  but  members  will  be  unable  to  do 
anything  even  if  they  should  have  any  inspiration  in 
any  direction,  because  they  will  have  neither  sufficient 
appropriations  nor  police  power  {  fortunately)  in  order 
to  obtain  information  indispensable  to  their  work  as 
spies.  Finally  they  would  perhajjs  receive  offers  of 
employment,  but  would  they  continue  to  receive  de- 
mands fcr  work? 

When  the  employees  of  the  Postal,  Telegraph  and 
Railway  departments  organize  strikes,  they  resolutely 
sacrifice  to  their  own  interests  those  of  their  fellow 
citizens.  They  are  speculating  on  the  weariness,  the 
privations,  the  disasters  that  inevitably  follow  as  well 
as  upon  the  weakness  of  the  government  in  its  atti- 
tude toward  them. 

1  have  not  spoken  in  this  chapter  of  the  patrons  of 
state  railways.  I  have  already  demonstrated  suffi- 
ciently the  fate  of  both  passengers  and  merchandise 
when  confided  to  iheir  tender  mercies. 

^Bulletin  de  I'OfF.ce  du   Travail,  February,    1912. 

368 


CHAPTER    VII 


PROGRAMS    OF    ORGANIZATION    AND    REGULATION 

The  Am  .  ican  Investigation. — Economy  and  Efficiency  in 
Government  Service. — Labor. — Three  Methods  of  Re- 
cruiting and  Promoting. — Regulation  of  Government 
Railways. — "Industrial  Efficiency." — Giolitti  and  the 
Hopes  of  Italy. — Elimination  of  the  Politician. — Mod- 
esty of  the  Partisans  of  Public  Operation. — The  De- 
partment Substituted  for  the  Minister. —  The  English 
Admiralty  and  Winston  Churchill. — M.  Chardon  and  the 
Fourth  Power. — Impossible  to  Give  Government  Service 
Industrial   Efficiency. — Either   Stagnation  or   Disorder. 

Plans  to  make  the  wheels  of  government  run 
smoothly  are  numberless.  Parliarnents  have  been  dis- 
cussing such  plans  for  years,  and  publications  suggest- 
ing all  sorts  of  methods  to  that  end  form  an  enormous 
library  in  themselves. 

Under  the  acts  of  June  23,  19 10,  and  March  3, 
191 1,  the  President  of  the  United  States,  Mr.  Taft, 
appointed  a  commission  charged  with  the  duty  of  in- 
vestigating the  manner  in  which  various  b'ederal  de- 
partments and  public  enterprises  were  being  managed. 
Among  other  things  the  Commission  was  to  make  a 
report  indicating  methods  by  which  greater  efficiency 
and  economy  might  be  brought  int<j  the  public  service. 

369 


VVIIKKK    AMI    W  UN     I'f 


IC    OWMCRSUll'     HAS    l-AII-KIJ 


Four  volumes  of  this  rc'iMirt.  outitkcl  Iiniciriicy  ami 
Econoiitx  in  Covcrnincnt  Scri'icc.  lia\c  already  ap- 
peared. T\vi>  contain  the  report  to  the  President  on  the 
urbanization  of  the  i^nuLiunienl  of  the  I 'niled  States 
on  lulv  I,  Kji  I,  and  hi<  nies:-a,L;e  of  January  17.  \<)\2. 
A  third  contains  another  [iresidential  message,  dated 
April  4,  1912.  toi^ether  with  the  reports  of  sug^^este  1 
modifications  to  he  introdiun-d  into  the  various  deiiarl- 
ments  and  the  remarks  of  tlie  heads  of  the  deixutments 
thereon.  A  f(jurth  small  volume  contains  a  third  mes- 
sage of  the  President,  transmitting  the  conclusions  of 
the  commission  regarding  the  centralization  and  the 
distribution  of  government  publications. 

The  fact  that  such  an  investigating  comiuittee  \v;;s 
appointed  at  all  is,  of  course,  a  sufficient  proof  that 
Congress  and  the  President  had  found  that  all  was  not 
going  well  in  the  Federal  administration  of  the  I'nited 
States.  But  where  is  the  country  whose  administra- 
tion is  perfect?  Do  we  l-"renchmen  not  hear  every 
year,  apropos  of  the  budget,  and  es])ecially  this  year 
in  regard  to  the  organization  of  the  budget  of  1907,  the 
most  violent  attacks  against  the  blench  administrative 
svstem.  and  its  methods?  To  increase  the  activities 
of  the  government  is  not  the  way  to  improve  its 
habits  or  to  bring  about  economy.  Such  is,  neverthe- 
less, the  h(jmeoi)athic  remedy  which  a  numl)er  of  those 
who  are  indulging  in  the  most  violent  criticisms  are 
now  proposing. 

The  authoritv  of  the  Federal  g(n'ernment  of  the 
United  States  extends  over  a  territor>  equal  to  that 
of  eight-tenths  of  Europe  and  over  a  j)opulation  of 
92,000,000  people. 

370 


PROGRAMS    OF    oki^AMXA  1 1(J\    AM)    KEclUl.AlIOM 


"Tlif  Operations  of  the  Covcnimciit  affect  tlic  interest 
of  every  person  living,'  witliin  the  jurisiliction  of  the 
L'nited  States.  Its  pross  ex])en(litures  amount  to  nearly 
S !  ,o(X),cK)0,ooo  annually.  IncUulinju^  tlie  i)ersonnel  of  the 
.Military  and  Xaval  estahli>linients.  more  th;.n  400,000 
ptrsons  are  requircl  to  do  the  work  imposed  hy  law  upon 
the  executive  hraiuh  of  the  <  iovermnent. 

"This  vast  organization  has  never  heen  studied  in  de- 
tail as  one  piece  of  administrative  meclianism.  .\t  no 
time  has  the  atteni{)t  heen  made  to  study  all  thc-e  activi- 
ties and  agencies  with  a  view  to  the  ass'i;iiment  of  each 
activity  to  the  agency  hest  fitted  to  its  perfonnance,  to 
the  avoidance  of  duplication  of  j^lant  and  work,  to  the 
integration  of  all  administrative  agencies  of  the  Ciovern- 
nieiit,  so  far  as  may  be  practicable,  into  a  unilied  organi- 
zation for  the  most  effective  and  economical  dispatch  of 
public  business." 

Mr.  Taft  makes  the  .same  complaint  in  regard  to 
.American  oflici;ii  dociunents  that  has  been  made 
against  similar  French  docunients,  and  which  can  be 
brought  against  the  official  documents  of  every  coun- 
try: 

"Notwithstanding  voluminous  reports,  presented  an- 
nually to  the  Congress,  no  satisfactory  slatemeiu  has  ever 
been  published  of  the  financial  transactions  of  the  (lOv- 
ernnient  as  a  whole.  Provision  is  made  for  due  accouiU- 
al;ility  for  all  moneys  coming  intcj  the  hands  of  olflcers. 
But  no  general  system  has  ever  been  devised  for 
rej)orting  information  as  to  the  actual  costs  entailed  in 
the  operation  of  indixidnal  services  nor  to  make  possible 
the  exercise  of  intelligent  judgment  concerning  the  value 
of  the  results  obtained  when  contrasted  with  the  sacrifices 
required.     1  am  convinced  that  the  time  has  come  when 

Z7l 


WHF.RF.    AXn    WHY    JMTBI.IC    OWNKRSfUP    HAS    FAH.KD 

the  Cnvernnicm  ■-lintild  take  stocl;  of  all  the  activities  and 
agencies  and  ffjrniulate  a  comprehensive  plan  with  refer- 
ence to  which  future  changes  may  he  made.  The  report 
of  the  commission  is  being  prepared  with  this  idea  in 
mind." 

One  great  dif^culty  in  all  countries  is  the  recruitmg 
of  employees:  how  to  enlist  the  ablest  men  and  put 
them  into  the  positions  to  which  they  are  best  suited. 

The  message  of  Mr.  Taft  of  April  4,  191 1,  declares 
that  legislation  must  establish  "a  merit  system  which 
will  guarantee  to  the  people  in  the  conduct  of  the  pub- 
lic business  the  advantage  of  officials  chosen  for  their 
capacity  and  devoting  their  time  and  their  talent  exclu- 
sively to  their  duties."  This  is  a  desire  more  easily  ex- 
pressed than  realized.  An  unhampered  selection  of 
employees  is  only  too  apt  to  result  in  favoritism  and 
injustice. 

Coinpetitive  examination  is  a  Chinese  method  which 
by  no  means  insures  capability.  In  the  competitive 
examinations  of  British  India,  the  Hindoos  succeed 
where  the  ^Musselmen  fail,  and  the  Musselmen  protest 
in  the  name  of  all  humanity  that  competitive  exami- 
nations too  often  bring  out  nothing  but  the  qualifica- 
tions of  a  parrot. 

Promotion  based  merely  on  length  of  service  puts 
a  premium  on  inertia  and  incapacity. 

Whatever  may  be  the  disadvantages  of  promotion 
based  on  arbitrary  selection,  it  is  the  only  method 
which  will  ])lace  the  really  capable  man  in  higher  posi- 
tions.    Private  industry  pro\es  this. 

Promotion  by  selection  is  a  fystem  that  is  not 
adopted  and  that  cannot  be  adopted  by  a  state.     Selec- 

372 


PROGRAMS    OF    ORGANIZATION    AND    RKGUI.ATION 


tion,  instead  of  falling  upon  the  more  serviceable  man, 
will  inevitably  fall  upon  the  man  who  has  the  greatest 
amount  of  pull.  The  Navy  has  its  "sons  of  the  Arch- 
bishop," while  all  departments  have  "the  sons  of  their 
fathers." 

Every  trading  operation  demands  regulation,  but 
the  regulation  of  a  state  department  tends  to  become 
so  minute  that  ver}  '^ften  it  becomes  an  end  in  itself 
and  impedes  action. 

The  state  railway  of  France,  for  example,  is  sub- 
ject to  the  administrative  control  oi  the  department 
of  Public  Works;  to  the  department  of  Finance,  which 
regulates  its  expenditures;  to  the  judicial  control  of 
the  Court  of  Accounts;  and  finally  to  parliamentary 
control,  which,  aside  from  all  the  others,  appears  in 
three  separate  and  distinct  phases  in  the  budget  of  the 
state   railway  system. 

Under  the  Ut\t  Industrial  Efficiency  of  the  State  Rail- 
ways M.  Baudin  demands  the  abolition  of  these  in- 
dispensable censorships.  In  other  words,  he  is  asking 
that  the  management  of  the  state  railways  be  permit- 
ted to  issue  bonds  in  such  quantity,  at  such  time,  and 
at  such  rate  as  t  may  deem  wise.  However,  no  sane 
minister  of  Finance  will  ever  permit  a  government  de- 
partment to  use  government  credit  at  its  pleasure. 

State  undertakings  have  no  "industrial  efficiency," 
because  they  are  subordinate  to  the  general  interests  of 
the  state  and  they  must  be  rigorously  controlled. 

In  1905  a  grand  centralization  of  the  Italian  rail- 
ways was  begun.  There  was  a  general  desire  to  have 
important   government   undertakings  concentrated   in 

373 


WHERE   AND    WHY    I'URLIC    dWNK       .IIP    HAS    FAILED 

Rome,  and  then.-fi)rc  the  entire  organization  of  the 
railway  lines  was  brc^ken  up.  In  ion  Minister 
Sacchi  made  an  attempt  to  model  the  government  rail- 
way service  upon  the  system  being  operated  with  suc- 
cess by  the  Adriafc  Railway  Company.  Theorists 
and  experts  in  government  and  municipal  oneratKHi 
took  care  to  announce:  "Our  system  will  be  an  ex- 
cellent one  because  it  is  to  be  managed  like  a  private 
enterprise."  Giolitti  also  emphasized  this  policy  in  his 
explanation  of  the  reasons  for  taking  over  life  insur- 
ance: 


"We  have  no  intention  of  creating  a  new  organization 
of  bureaucrats,  but  a  truly  independent  undertaking 
which  will  diflfer  from  private  business  of  the  same  kind 
only  in  the  fact  that  it  will  be  the  property  of  the  gov- 
ernment. The  fact  that  this  enterprise  belongs  to  the 
state  does  not  imply  that  it  has  a  character  different  from 
that  of  private  enterprises.  In  so  far  as  we  are  con- 
cerned, the  sole  difference  is  to  be  found  in  this  fact 
that  the  proprietor  is  not  an  individual." 

T-nuary  17.  1911,  M.  Globinski,  .Austrian  minister 
of' railways,  insisted  in  an  ordinance  "on  the  essen- 
tially commercial  character  of  the  railways,  of  which 
the  bureaus  ought  to  take  due  account." 

In  the  end  all  efforts  to  repudiate  the  essentially  ad- 
ministrative character  of  public  undertakings  are  a  real 
condemnation  of  them.  Why  try  to  make  a  state  en- 
terprise do  what  it  really  cannot  do?  The  private  en- 
terprises which  it  is  replacing  are  presented  to  it  as 
models  to  be  imitated.     Were  they  then  so  good  ?     At 

.^74 


ruoc 


IRAMS    <■)!•     (IKOANI/ATION     ANU     REGULATION 


an 


y  rate  tlicy  were  better  adapted  to  their  purpcse  than 
the  i)ublic  undertakin.t^  substituted  for  them. 

Tliere  is  oidv  one  le.^ntiir.ate  motive  for  sulistitutincj 
public  ownership  for  private  enterprise;  that  is,  the  ab- 
sorption of  the  pn^l'.ts  (.f  private  ennipanies  for  the 
benefit  either  of  consumers  or  taxpayers,  on  con(htion. 
of  course,  that  such  profits  are  to  be  made. 

The  Itahan  National  Insurance  Fund  is  a  legal  en- 
titv.  and  it->  nian.-i-enienl  is  autonnnioiis.  Nevertheless, 
the  insurance  policic>  which  it  issues  are  guaranteed  by 

the  state. 

Its  management  oMisists  of:  (a)  An  admmistrative 
council :  ib)  a  standing  committee  :  {  c)  a  general  man- 
ager ;  ((/)  trustees:  (r)  a  technical  and  soliciting  staff. 

The  administrative  council  is  comi)osed  of  nine  mem- 
bers, and  is  appointed  by  royal  edict  on  the  motion 
of  the  minister  o^  .Agriculture,  Industry  and  Com- 
merce. The  same  edict  apjtoints  the  president  and  the 
vice-president  of  the  council.  I'our  of  its  members  are 
public  officials,  and  four  others  private  individuals. 

M.  Jeze  is  enthusiastic  because  the  management  is 
out  of  reach  of  the  inlUience  of  senators  and  deputies 
and.  in  a  general  way.  of  all  persons  holding  elective 
offices.  "Therefore,  all  political  interference  i„  re- 
moved from  the  operation  of  the  enterprise." 

Now  the  men  who  projiose  and  vote  for  government 
monopolies  are  politicians,  ministers,  deputies,  sen;i- 
tors.  Yet,  at  the  verv  moment  that  they  are  increas- 
ing the  functions  of  the  state,  they  are  branding  the 
men  who  direct  the  state  with  dishonor.  For  in  order 
to  heap  up  the  measure  of  irony,  they  declare  that  they 

375 


WHKRK    AM)    WIIV     ITHl.K     OW  N  Ili.^lII  1'     HAS    lAlLKI) 


are  incapaljlc  of  nianaj^Miig  the  very  institutions  with 
whicli  they  themselves  have  sd  f,'enernurly  duwered  the 
state.  Modesty  eaii  surely  he  pushed  no  further  than 
to  say:  "We  will  \'ote  fur  state  ni.  .noijolies,  but  we 
declare  ourselves  unfit  to  adnnnister  them,  because  if 
the  politicians  who  vole  for  them,  and  among  whom 
we  count  <nirselves,  should  mana.^e  such  enterprises, 
disorder,  injustice  and  corruption  wmild  ensue.  There- 
fore we  decline  for  ourselves,  and  we  refuse  to  any- 
one who  has  been  a  senator,  deputy  or  minister  the 
privile,e;e  of  managinj;  the  Xational  'nsurance  Fund." 

That  ministers,  senators  and  dei)Uties  have  adopted 
this  inconsistent  attitude  may  lie  a  proof  of  their  loft\- 
sense  of  \mh\k  duty,  but  can  they  really  believe  that 
they  are  enhanciuj,'  the  prestige  of  deliberative  assem- 
blies by  declaring  themselves  unworthy  to  direct 
monopolies  that  they  themselves  have  created?  Are 
there  not  men  in  public  life  "wdio  have  demonstrated 
their  tcchmcal  and  administrative  capacitv"  ?  Xo 
matter!  The  title  "member  of  parliament"  appears  to 
be  reason  enough  to  discpialifv  them. 

But  the  members  of  the  adtiiinistrative  council 
above  referred  to  arc  appointed  b^-  ministers  who  are. 
of  course,  ]iublic  men,  Ministers  also  appoint  the 
general  manager  Are  we  then  to  believe  that  all  po- 
litical considerations  are  eliminated  in  these  selec- 
tions? 

Finally,  the  trustees  must  present  annual  reports, 
which  it  is  the  duty  of  the  minister  of  Agriculture,  In- 
dustry and  Commerce  to  communicate  t(j  Parliament, 
together  with  the  report  of  the  managing  council 
(Conseil  d'Administration  de  la  Caisse).     Moreover, 


PROGRAM.s    (IF    ORl.AN  I/.A  111  i.\     AND     Kit .  I'LATION 

the  technical  and  analytical  balance  sheet  containing  all 
the  flata.  a'linittinj,'  of  estimate  as  to  tlie  iirofiis  realized 
by  the  l-"uiid  t'nini  each  contract  and  each  form  of 
insurance,  accurdint;  to  the  nature  <>f  :he  insurance 
operation^,  inu'-t  be  coinniunicated  to  V  liament  ever\- 
three  years. 

Conse((uently  ilie  inlerterence  of  politicians,  to  use 
the  scornful  title  of  i'rofessor  Jeze,  is  ncjt  completely 
eliminated  from  the  niaiiayement  of  the  National  In- 
surance Fund.  Moreover,  it  cannot  be  eliminated  from 
any  government  mnnnpoly,  except  by  constituting  such 
monopoly  a  power  apart  and  ]ilacing  it  above  all  other 
institutions  of  the  country.  The  ministers  appoint  the 
imi)ortant  officials.  The  government  has  always  the 
right  of  control,  an<l  every  three  years  a  detailed  ac- 
count of  the  business  of  the  monopoly  must  be  sub- 
mitted to  Parliament. 


In  a  report  of  M.  Gaudin.  of  July,  1912,  I  read  the 
following  regarding  supplementary  appropriations  to 
the  state  railway  of  France: 

"The  administrative  organization  of  the  state  system 
tends  to  eliminate  all  political  interference  with  the 
employees.  The  form  of  the  statute  as  actually  pre- 
pared, by  the  execution  of  articles  58  and  68  of  the  law 
of  July  13,  191 1,  serves  to  keep  the  department  free 
from  all  external  influence." 

This  looks  well  in  print,  although  everyone  knows 
that  it  will  not  amount  to  anything.  The  statute  ap- 
peared April  31. 

In  October  the  director  of  the  state   railway  sys- 


WHI'.KI-:    AM)    WIIV     IMUlli     ()\\  M.U.->llir    11A>    lAII.KD 

Hill  addrc'^stMl  a  U'trr  tn  tlu-  (Icpnties,  (icclarini,'  that  in 
tutiire  IK)  further  attnitifm  wnuld  ht-  paid  to  tlivir  rvc- 
..mnicndatinn-  N  -iugk-  im-idctit.  hMwt-vcr.  is  helping' 
■li>  prove  that  attention  will  at  least  he  paid  to  whatever 
the  suh])ret'eet  shall  a^k  oi  the  ntiieial  s[)y  ealled  the 
niunici|)al  delej,'ate. 


In  I'lrj  Winston  Churchill  f)reseiited  as  his  own 
naval  jjrojjjrani  the  deniaiuN  (d  the  I'oard  of  Ad- 
niiraltv.  "The  Hoard  of  .\ihniralt\-  stttles  everything; 
the  cal)inet  onlv  registers  its  decision-,"  saiil  the 
Rconomist.^  If  each  service  were  to  -ettle  its  own 
affairs  in  complete  indei)endence,  what  hut  anarchy 
and  ruin  could  result?  It  is  the  duty  of  the  i,Mivern- 
inent  to  determine,  accordinj^  to  t^uMieral  political, 
iinancial  and  economic  conditions,  the  jiart  that  each 
ser-ice  out^lit  to  play  in  the  general  scheme  of  things, 
as  well  as  in  regard  to  the  manner  in  which  ich  sc.v- 
icc  is  heing  carried  on.  ("oordination  of  effort  and  rc- 
sponsihility  is  the  condition  of  the  existence  of  a  na- 
tion. The  men  at  the  head  of  puhlic  affairs  are  alone 
ahle  to  hring  ahout  such  coordination,  and  they  ought 
to  assume  not  only  the  task,  hut  likewise  its  responsi- 
hility. 

Every  extension  of  governmental  functions  involves 
new  duties  and  the  creation  of  new  officials,  while,  at 
the  same  time,  it  increases  the  importance  of  those  al- 
ready in  office.  The  preponder.ant  role  which  politi- 
cians themselves  yield  to  bureaucracy  is  easily  seen. 
Thev  declare  themselves  incapable,  and  abdicate  in 
favor  of  the  bureaus. 

'July  27,  1912. 

57" 


rRUGR.wM.--    (»!■    (iKGAM/.ATION    AM>    KHiliAriON 

All  this  appears  so  natural  that  a  rccnrdin<,^  secre- 
tary to  tlu'  Cnuncil  I'f  State.  M.  Chardoii,  favor><  tlu- 
orj,'anization  of  a  fourth  division  of  ^'<>vi'rnniciit  tn  he 
called  "the  admniistrai'rrc  power."  Mr  (Kclarc^  tliat 
the  dircftnr  "\  anv  '-talc  dt'iiartrmiit  -^hnuld  lir  ahlc  t" 
apinal  tIirouj;;li  his  writings  and  speeches,  and  aNn  l)y 
his  ])o>it!on.  a-  a  coniniis-i<  iirt  of  t,'overnnH-nt  n" 
«louI)t.  a}.jain'>t  tlif  decisions  of  hi'^  niiin^terial  superior 
lint  -.urelv  the  heads  of  dcpartiiirnt-  would  have  a  lo,t,d 
(■■A  riL^ht  to  the  same  attitude  toward  their  directors; 
the  inana,cjer>  of  hureaus  tow.ird  the  head  of  their  de- 
liartinent;  and  the  assistant  managers  in  regard  to  the 
inanai^ers  of  the  hureaus  ;  the  head  detl^s  and  the  cleri- 
(al  staff  with  respect  to  tluir  superiors,  and  s,,  on 
The  moment  anv  such  power  comes  to  he  recoLjnized 
anarchy  will  have  heeii  proclaimed. 

.Xdministration  is  not  a  power  comparahle  to  the 
e.xcctnive.  legislative  or  judicial  power.  It  is  an  essen- 
tial i)art  of  the  executive  power.  It  can  neither  he  sep- 
arated from  it  nor  exi'^t  ajjart  from  it.  .\n  executive 
])ower  'uch  has  for  its  prime  duty  the  security  f)f  the 
people  of  the  nation  at  home  and  ahrcjad  can  he  only 
a  political  power. 

It  is  precisely  because  of  the  essential  nature  of  the 
executive  power  that  duties  foreij^n  to  it,  and  which 
must  inevitably  corrupt,  disintegrate  and  prevent  it 
from  fulfilling  its  real  functions,  ought  not  to  be 
forced  upon  it. 

All  attempts  to  give  "a  business  organization"  to 
government  enterprises  are  condemned  to  failure  in 
advance.  Either  such  undertakings  will  languish  un- 
der an  abuse  of  control  which  would  impede  action,  or, 


.A.. 


^        • 


will  in      A\|)    WHS      11    l!l  U     dU  XKKSIIIl'     HAS    lAll-KI) 

while  opcrafintj  in  full  lilurtv,  tlu  \-  w  ill  t'nll  into  moral 
and  finaiKial  (iisdrdiT.  And  ivt  il  in-t  Ik-  forgnttcn 
that  ■^taiMiatinii  and  di^nrdrr  far  from  nullifying  fre- 
(luently  rcinlurcc  each  wiher. 


40U 


BOOK    IV 

POLITICAL     AND     SOCIAL     CONSE 
gUENCES  OF  PUBLIC  OPERATION 

CHAPTER    I 


SOCIALIST    PROGRAMS    AND   THE    FACTS 

1.  An   American    Idea. 

2.  Facts   and    Programs.— Organization   of    Public    Service. 

Legal  Monopoly. — Xatural  Monopoly. — .\ctual  Monop- 
olies Iranslornu'd  inuj  Legal  Monopolies. — Restor- 
ing the  Profits  of  Capitalism  to  the  Comnnmity.— l-lx- 
haustion  of  Taxable  Properly. — l-'iscal  Monopolies. — 
A  Quotation  from  Montesquieu. —  Fraud. — Resolution 
bf  the  I-'rench  Chamber  of  I~)eputies  n  !-"avor  of  the 
Alcohol  Monopoly. — (ieorgcs  (  ochery  and  the  Alcohol 
and  Insurance  Monopolies. — .Siginficance  of  His  Words. 
Adoption  by  the  Budget  C  ominittee  of  1901  of  a  Pro- 
posal to  Set  up  a  Petroleum  Monopoly- — Proposal  to 
Monopolize  the  Importation  of  Wheat  and  b'lour. 

3.  Daring    Theories. — Timidity    in    Application. — Socialism 

Under  Cover  and  Socialism  on  Parade. — Ramsay  Mac- 
donald. 

4.  Municipal    Socialism. — Platform    of   the    Three    Political 

Groups  in  Great  Britain. — The  International  Socialist 
Congress  of  1900  and  the  Municipal  Program. — The 
Claims  of  M.  Lafferre  in  the  Xame  of  the  Radical  and 
Radical-Socialist  Party. — The  True  Founders  of  Mu- 
nicipal Socialism. — The  ('ongress  of  St.  Quentin. — 
Method  of  Combating  Capitalism  and  Middle  Class  Po- 
litical Conservatism. 

.,0 . 


V/HFRK    .WD    WHV    I'l-RriC    OWNKRSHIP    TIAS    FAIL 


ED 


5.  The     Dupes.— A     Project     of    Municipal     Bakeries    an.l 
Butcher  Shops. 

I.  In  ()|)|)(isition  tr.  tlie  principle  of  treedoni  of  tdiii- 
niercc  anfl  iTi'liutrv  luld  j^^cncra'ly  throughout  tlir 
!  nitpd  State-.  'Iw.utiiilt  Ccntiir  Socialism^  a  post- 
humous work  hy  an  .Xnii-rii-an  natncd  Ivlmond  Kelh. 
offcr.s  the  tollowin-:^  remedy  for  eontempf)rarv  poliii 
cal,  social  and  induMrial  unrest: 

The  Socialist  orj^Mnization  recognizes  hoth  private 
and  puhlic  property.  Certain  industries  will  he  fullv 
socialized.  In  such  industries  capitalist  direction  and 
ojieration  will  he  wholly  eliminated.  The  production  of 
those  thing';  for  which  the  demand  is  great,  and  espe- 
cially those  which  can  he  most  easilv  and  fraudulently 
adulterated,  will  he  socialized,  as  will  he  the  case  also  in 
industries  of  which  a  monopolv  is  readilv  estahlished. 
( )tlicr  industries,  as  petroleum,  will  he  given  over  to  the 
regulation  of  a  s\iidicate  of  workingmen  with  a  hoard 
of  directors  in  which  the  state  will  he  represented  in 
order  to  insure  state  control. 

I  he  private  ownership  of  farms  will  he  maintained. 
l)ut  ])ruate  ownership  in  cities  will  he  supi)ressed. 

1  mention  il  is  hook,  hecau-e  it  has  attracted  soin.' 
attention,  although  the  childish  simplicity  of  its  ]iro- 
posals  is  sufficient   for  an  estimate  of  its  value. 

2  In  the  Socialist  vocahulary  the  establishment  of 
state  and  mMnicij)al  nioiiopohes  is  called  "the  or- 
ganization of  public  service."  and  a  distinction  is 
made  between  legal  mmiopolies  and  natural  monopo- 

'  Longman?.  Green  &  Cn  ,  New  York,  1910. 


SOCIALIST    PROGRAM: 


AND   THF.    FACTS 


lies.     In  the  end.  l.-wcv.r.  ,h..  ,l,ttcrcnce  disappears 
for  private  property  ,s  tn  be  conf.scated,  whether  ub 
under  the  name  ..t  railway  ..peiatu.n    munng  o     the 
distributicm  of  hvdro-electric  power.      Nhn.ster-al  ot- 
fiees  are  to  be  aboh>hed.  and  notaries,  attorneys  and 
baihffs  transformed  mtu  fuiKtu.nancs 

Sociahsts    are    nmte    willing    to    acknowledge    lliat 
the  refining  of  sugar  or  of  oil  is  neither  a  legal  no 
a  natural  monopoly,  but  these  industries   -^;-;-;^-;^ 
as  thev  are  in  a  small  number  of   hands,  are  xirtua 
monopolies.      Therefore,    ,.    the   government   l.nd.    it 
worth  while,  they  are  to  be  converted  mto  P^W- sl- 
ices     Indeed,  state  and  municipal  monopolies     .cmg 
easy  to  organize  and  to  operate,  are  going  to  depruv 
the  capitaHsts  of   magnihcent  prohts.   which  wdl  be 
resto  ed  to  the  community.  .      _ 

To  econonuze  in  the  budget  is  out  of  the  ciuestion 
U-  the  nH-<.ue  tax  the  mcon.es  already  suhjec^  _to 
super-taxation  will  be  so  reduced  that  the  state 
revenue  will  be  absolutely  insuthcient  to  mee  the 
n^ds  of  the  social  budget  of  either  the  Radical  and 
Radical  Socialist  party  or  of  the  Socialist  P^r^'^  ^ 
only  available  remedy,  th.retore.  will  be  to  e.tabli.h 

fiscal  monopolies.  .       . 

Socirdist     also  hold  that    when   any  commodity    s 
Ininened   .  ith  h..u  v   indirect  taxes,  that  commodity 

"in  to  be  transformed  into  a  nvmopoly:  and  ^ 
..r'^this  they  have  quoted  inaccurately  the   following 
passage  from  Montes(|Uieu  :  ^ 

"In  order  to  make  the  ,,urchaser  confornd  the  price 
of  tt  commodity  with  the  impost,  there  must  be  some 

^Ejprit  dcs  Lois,  book   13.  chapter  8. 


WHFRE    AND    WHY    PUBLIC    OWNERSHIP    HAS    FAILED 


projjortion  between  tlie  impost  and  tlu  value  of  the  com- 
modity :  for  which  reason  theri'  ought  not  to  be  an  ex- 
cessi\e  duty  upon  merchandise  of  httlc  value.  There  are 
countries  in  which  the  duty  exceeds  seventeen  or  eighteen 
times  the  value  of  the  commodity.  In  this  case  the  prince 
removes  the  disguise — viz. — sul)jects  plainly  see  they  are 
dealt  with  in  an  unreasonable  manner,  which  renders 
them  most  exquisitely  sensible  of  their  servile  condition. 

"Besides,  the  prince,  to  be  able  to  levy  a  duty  so  dis- 
proportioned  to  t'u'  value  of  the  commodity  must  be  him- 
self the  vendor  and  the  people  must  not  have  it  in  their 
power  to  purchr  ■  it  elsewhere :  a  practice  subject  to  a 
thousand  inconveniences." 

Montesquieu  might  have  been  able  to  approve  with- 
I 'Ut  reserve  the  suljslitution  of  a  monopoly  for  heaw 
taxes;  but  we  no  longer  live  in  the  time's  when  two 
lines  from  Hippocrates  or  Aristotle  decided  our  prob- 
lems for  us.  We  see.  however,  under  what  conditions 
and  with  what  reserve  Abontesquieu  explains  the  mo- 
tives which  cause  the  government  to  act  in  this  manner. 
For  their  own  purpcjses  the  Socialists  have  made  capi- 
tal of  his  text;  but,  after  veritication,  it  proves  refrac- 
tory. 

Still  another  argument  invoked  to-day  in  favor  of 
state  monopoly  is  that  it  will  suppress  customs  frauds. 

^'et  in  I'Vance  there  are  districts  in  which  the  tax 
upon  matches  yields  no  receipts,  and  between  the 
frontier  of  Belgium  and  France  the  principal  occupa- 
tion of  the  customs  officers  is  preventing  the  smug- 
gling of  tobacco.  It  is  in  regard  to  jnst  such  a  condi- 
tion as  this  that  Ab)ntes(|uieu  has  (Kclarcd  : 

3«4 


SOCIALIST    PROGRAMS    AND   THE    FACTS 

"Smuggling  being  in  this  rase  extremely  Uicrntivc.  tlie 
natural  and  most  reasonable  ])enalty— namely,  tht-  ron- 
fiseation  of  the  merchandise— becomes  incapal)le  of  put- 
ting a  stop  to  it :  especially  as  tliis  very  merchandise  is 
intrinsically  of  inconsideratde  value.  Recourse  must 
therefore  be  had  to  extravagant  punishments  such  as 
those  inrtieted  for  capital  crimes.  All  proportion,  then, 
of  penalties  is  at  an  end." 

But  it  is  said  that  in  France  tobacco  is  a  lucrative 
monopoly  (we  do  not  talk  so  much  about  matches), 
and  a  monopoly  of  alcohol  is  being  considered.  ^  As  a 
result  of  the  Socialist  propaganda  in  1904,  the  French 
Chamber  of  Deputies  adopted  the  following  resolu- 
tion : 

"Beginning  with  January  i,  1905,  the  government  will 
introduce  a  monopoly  of  the  manufacture,  adulteration, 
modification  and  importation  of  alcohol. 

"No  new  distillery  may  be  created  after  the  promulga- 
tion of  this  law." 

That  resolution  remained  on  the  table,  but  five  years 
later,  November  19,  1909,  Georges  Cochery,  then  min- 
ister of  Finance,  said: 

"The  question  of  an  alcohol  monopoly  agitated  some 
years  ago  and  taken  up  witii  enthusiasm  was  soon  after- 
ward dropped.  Tt  has  again  been  taken  up,  however, 
and  an  examination  of  the  whole  subject  will  shortly  be 
made.  (Loud  applause  from  the  extreme  left,  namely, 
the  Socialists  and  Radical  Socialists. ) 

"But  before  it  is  investigated  still  another  problem 
may  possibly  be  brought  up— the  question  of  an  insur- 

385 


VNHICKK    AND    \\\iV     IM'lil.U      (i\V  \  KKS 1 1  1  1'     HAS     lAIl.iaj 

ancf  iiinii()|joly,  nr  at  k-a^t  a  iiiDiKipuly  oi  ctTlain  kind^ 
of  insurance."' 


W'licn  such  words  as  these  are  spoken  hy  a  nii.iister 
of  h'inance,  tlu'\-  ae(iuire  a  sii^nificance  lliat  skeptics, 
the  indifferent  and.  with  much  nmrt  reaMin.  interested 
parties  { and  in  this  case  the  interesteil  parties  are  the 
whole  h(j(iy  dt  consumers  and  ta.\payer>  )  would  make 
a  mistake  in  passin.f;  over.  The  vole  on  the  resolu- 
tion of  tile  ('hainlier  >>i  l)ei;uties  >hiiws  of  what  aberra- 
tions majorities  are  capable. 

In  October,  iijoi.  the  I'.udget  Committee,  after  liav- 
ing  rejected  a  ta.\  of  i  franc  50  per  cut.  on  crude 
-  *  oleum  prdjjo^ed  by  M.  C'aillaux,  minister  of 
ice.  ])asse(l  by  seven  votes  aiijainst  four  ind  two 
or  thrjc  absences  a  bill  introduced  Ijy  .Marcel  Sem- 
bat  and  worded  as  follows: 

"Article  1. —  The  purchase,  refinint^  and  sale  at  whole- 
sale of  ])elruleuni  are  exclusive  prerogatives  of  the  state 
throughout  its  territory."' 

On  the  same  day  the  Committee  introduced  the  ar- 
ticles of  the  Sembat  bill  in  its  finance  law. 

On  l'"ebru;irv  17.  iSi)4.  M.  Jaure.s  introduced  a  bill 
signed  by  Thierry-Cases.  Bepmale.  Millerand.  \  iviani. 
Desft)ntaines.  Sembat  and  X'aillant.  a>  follows: 

"The  state  has  the  sole  right  to  import  foreign  wheat 
and   Hour. 

"It  will  sell  these  commodities  at  a  'price  fixed  annually 
by  law. 

"It  will  sell  flour  at  a  price  baseil  '^r.  the  price  of 
wheat  and  also  determined  by  law." 

386 


SOCIALIST     IMiOCKAMS    AND     Till-;    1-Al'TS 

In  1903  MM.  I'aul  Con-tans,  lui.  X'aillant.  Mar- 
ocl  Scnibat  and  nine  (.ihcr  Socialist  deputies,  "in 
order  to  put  an  end  to  the  food  crisis."  introduced 
a  bill,  the  tirst  clause  of  which  >uppressed  the  customs 
duties  upon  wheat  and  tlour,  hut  clause  3  of  which 
"chargecl  the  government  with  the  duty  of  iniportnig 
wheat  and  tlour  and  buying  it  at  home  as  well  as 
abroad  in  (juantities  necessary  and  sufficient  f(jr  na- 
tional needs." 

Clause  4  established  a  commission  charged  with  or- 
ganizing "within  the  shortest  possible  period  a  na- 
tional commercial  service  to  supervise  the  food  sup- 
ply, including  especially  provision  by  the  government 
and  the  state  and  municipal  storehouses  of  ([uantities 
of  wheat  and  flour;  the  establishment  of  national  and 
municipal  mills  and  municipal  l)akeries ;  and  finally  co- 
operative agricultural  production." 


3.  But  side  by  side  with  the  above  audacities  went  a 
timidity  of  execution  springing  from  past  experi- 
ences. 

In  1912,  at  the  Congress  of  the  National  Railway 
Association,  Albert  'Ihomas.  a  Socialist  dejjuty.  ad- 
vised the  postponement  of  the  purchase  of  lines  other 
than  the  Western,  saying: 

"The  purchase  must  be  carried  out  in  a  different  man- 
ner from  that  of  the  Western.  R  will  be  necessary  to 
secure  the  financial  autonomy  of  tlie  system ;  the  partici- 
pation uf  the  employees  in  the  management:  and  also 
public  representation  therein.  In  order  to  conduct  a  cam- 
paign for  nationalization,  at  jiresent  neglected,  we  must 

387 


WIH-R!'     AM)    Win      ITIU  l(      OWVI-.KSIIII'     II  \S     lAIMD 

liavc-  a  suknin  declaration  (Jii  the  liart  of  an  organizcl 
proletariat." 

And  M.  Odinot  acids: 

"When  the  end  of  the  franchise  ^[ranted  'he  companies 
by  the  state  shall  have  come,  a  con-^iderahle  etTort  will  be 
necessary  in  order  to  bring  about  a  general  purchase." 

Thus  the  leaders  were  anxious  to  temporize.  They 
understood  that  for  theni  prijniises  and  programs  are 
worth  far  more  than  realization.  Such  a  statement, 
however,  in  bald  terms  w<juld  liave  been  a  confession 
^■f  lack  of  power  and  of  cliarlatanism.  They  therefore 
sought  pretexts  for  postponing  action  and  in  so  doing 
furnished  an  illustration  of  two  i)hases  of  Socialisin : 
one  underhanded  and  cowardly;  the  nthcr — meant  f(jr 
exhibition — full  of  audacity. 

In  spite  of  the  cautious  advice  of  their  leaders,  how- 
ever, the  delegates  answered  by  passing,  almost  unani- 
mously, an  order  of  the  day  providing  for  immediate 
nationalization. 

In  any  event — if  Socialist  councils  prevail — when 
the  time  cr)mes  for  the  roails  to  be  turned  over  t(j  the 
state,  they  will  scarcely  be  worth  the  trouble  of  buy- 
ing. As  the  contracts  which  bind  them,  however,  do 
not  expire  for  more  than  40  years,  some  time  must 
elapse  before  there  is  any  further  extension  of  the  ex- 
ijerimcnt  of  state  operation  of  railroads. 

In  the  I'nited  Kingdom,  in  the  course  of  the  dis- 
cussi(jn  over  the  answer  to  the  speech  from  the  throne 
of  b^bruarv  15,   1912,  Rainsay  Macdonald,  President 

388  ' 


S()(I\1ISI     I'KOC.KAMS    A.XI)    TIIK    KACTS 

of  tlu'  I.al  if  party,  presented  to  the  I  louse  of  Com- 
iiKuis  as  a  renieciy  for  industrial  unrest  "the  fixing  of 
a  minimum  salary  and  the  nationalization  of  tlie  rail- 
ways, mines  and  other  monopolies."  But  he  did  not 
develop  the  last  point  of  his  amendment  any  further. 
Sir  F.  Banbury  remarked  that  tlie  Labor  party  had 
introduced  this  last  bill  only  in  order  to  prove  to  the 
electors  that  it  was  still  alive.  Mr.  Ivobertson,  parlia- 
mentary secretary  of  the  P.oard  of  Trade,  congratu- 
lated Ramsay  Macdonald  on  the  discretion  with  which 
he  had  supported  it. 


4.  The  Social  Democratic  Federation,  the  Inde- 
pendent Labor  Party  and  the  babian  S(Kiety  are  all 
agreed  in  following  up  a  resolution  adopted  in  1896 
advocating  nationalization  of  the  tnines.  railways,  ca- 
nals, telegraphs  and  telephones ;  and  the  municipaliza- 
tion of  water,  gas,  electricity,  omnibuses,  pawn  shops 
and  steamboats:  the  manufacture  and  sale  at  retail  of 
tobacco,  bread,  coal,  milk  and  other  fundamentally 
necessary  commodities;  the  construction  of  workmen's 
houses;  the  manufacture  and  sale  of  alcoholic  drinks. 

The  International  Socialist  Congress  held  in  Paris  in 
1900  passed  the  following  resolution  : 

"That  it  is  the  duty  of  all  Socialists  to  force  a  recogni- 
tion in  all  projects  for  municipal  reform  that  they  are 
important  only  in  so  far  as  they  foreshadow  a  collectiv- 
ist  government,  and  to  force  upon  municipalities  public 
services  such  as  urban  transportation,  education,  baker- 
ies, medical  attendance,  hospitals,  water  supply,  the  dis- 
tribution of  power,  public  works,  the  police,  etc." 

389 


\\l 


II  KK    AND    WHY    I'UHI.IC    OWNKKSftlP    HAS    KAlLr.O 


In  iQcu  the  Radical  an.!  I^ulual  S-cialist  party 
adoplnl  tin-  same  municipal  prd-rani  a-  ihat  just 
(luote<l,  but.  in  refusnii;  to  nxuiiw/.v  ihat  it  had  bor- 
rowed its  pro-ram  tmm  the  Socialist.,  the  i)arty  even 
went  so  far  as  to  claim  the  theoru'^  thus  indorsed  as 
it  own  exclusive  property— under  the  circumstances  a 
somewhat  cool  proceeding.  I'ebruary  lo.  UKU.  M. 
Lafferr.'.  then  president  of  the  Executive  Committee 
of  the  i<adical  and  Radical  Socialist  party,  spoke  as 
follows : 

"The  key  to  the  municipal  financial  problem  lies  in  the 
application  to  it  of  an  eccjnomic  prof^'rain  consisting  al- 
most wholly  of  a  municipalization  of  all  utilities  in  com- 
mon use ;  gas.  electricity,  power,  general  transportation, 
etc." 

Further  on,  M.  LafYerre  speaks  with  enthusiasm  of 
"municipal  tire  insurance."  He  regrets  that  the  Coun- 
cil of  State  has  not  permitted  the  establishment  of  a 
municipal  pharmacy  at  Douai";  he  dilates  upon  the 
encouragement  which  should  be  given  to  the  construc- 
tion of  cheap  houses:  he  regrets  that  it  is  only  with 
great  difficultv  "that  municipalities  can  obtain  author- 
ity to  subsidize  cooperative  joint   stock  construction 

companies."  .       •    , 

He  --^ds  finally:  "Certam  skeptical  minds  assert 
that  our  program  is  nothing  but  a  sort  of  sweeten,  d 
Socialism.  It  should  be  insistently  repeated  thM  this 
program  is  ours,  altogether  ours."     After  whicn  he 

adds : 

'In  carrving  out  this  program,  already  so  vast,  we 
invite  the  friendly  cooperation  of  the  Socialists.     We 

390 


SOCIALIST    PROGRAMS    AND   THE   FACTS 

ask  them,  however,  not  to  forf^ct  our  prior  claim  tf) 
the  idea  that  all  i)r()perty  belongs  to  the  i)uhlic."  A 
hip^hly  impruikiit  addition.  It  would  have  been  im- 
possible for  M.  I.-afferre  to  prt)ve  such  a  statement, 
wlnlc  the  Socialists  wnuld  ni>t  have  had  the  smallest 
difliculty  in  demonstrating,'  that  the  lielgiaiis,  C'olins 
and  Cesar  de  I'aepe,  and  the  l-rench  l'.enoit  Malon 
and  Paul  P.njusse  were  the  true  founders  of  Municipal 
Socialism  and  the  forerunners  of  ihe  b'abians. 

During  the  Socialist  C^mgress  at  St.  Ouentin  in 
April.  191 1.  M.  Ivlgard  Milhaud  gave  expression  to 
the  tl'.eorv  of  the  municipalizati<:»n  of  service.  To 
forestall  any  criticism  regarding  the  meagre  results 
achieved  in  the  way  of  relief  of  taxation,  he  said  : 

'The  object  of  municipalizing  the  forces  of  production 
should  not  be  to  reduce  taxes,  but  to  reduce  the  cost  of 
living." 

This  statement  ought  to  be  kept  in  mind  by  those 
who  cherish  the  delusion  that  they  can  solve  the  (pies- 
tion  of  taxation  by  establishing  state  monopolies. 

The  Congress  also  passed  two  resolutions,  one  in 
favor  of  the  purchase  of  the  railways,  the  other  in 
favor  of  municipal  operation. 

"Municipal  services  ought  to  be  established  in  the 
first  place  for  the  advantage  of  the  laboring  people  and 
the  poor,  for  whom  they  ought  to  be  provided  at  cost 
price  if  remunerative.  And,  if  they  yield  profits  through 
their  use  by  other  classes  of  the  population,  these  profits 
ought  10  be  utilized  to  extend  municipal  services  in  the 
libcir  interest,  and,  above  all,  to  cteate  and  develop  gratui- 


WHERE    AM)    WIIV    I'l   lll.U     OW  N  ICKSHl  1'    HAS    lAILED 

tous  education,  sanitation,  insurance,  organized  charity, 
and  food." 


Then  in  order  that  there  should  he  no  dnuht  as  to 
the  character  of  these  claims  it  was  adiled  : 

"By  their  municipal  action,  by  incrcasiiijj  the  guaranties 
of  ])rosperity,  lilicrty  and  the  figlitiiig  clianccs  of  tlie  pro- 
letariat, Socialists  can  add  to  the  force  of  tiicir  claims  as 
well  as  of  the  fight  against  capitalism  and  middle  class 
political  conservatism." 

If  interventionalists  of  every  species  "for  their  own 
reasons"  help  along  the  work  of  the  Socialist,  it  will 
not  be  for  lack  of  warning  on  the  part  of  the  Socialist 
party  itself.  But  there  arc  men  who  have  a  natural 
aptitude  for  and  take  pride  in  allowing  themselves  to 
be  made  dupes. 

5.  Tn  .August,  191 1,  the  cost  of  living  in  France 
reached  a  crisis.  Trouble  brrtke  out  in  the  North,'  and 
the  Caillaux  ministry  found  nothing  better  to  do  than 
to  otYer  to  the  women  and  men  who  found  bread,  meat, 
milk,  and  vegetables  too  high  this  poultice : 

"Municipalities  may  be  authorized  by  a  decree  of  the 
Council  of  State  either  to  assist  by  loans  in  the  creation 
of  cooperative  societies  for  the  establishment  of  bakeries 
and  butcher  shops,  or  to  establish  themselves,  and  cause 
to  be  publicly  operated,  bakeries  and  butcher  shops,  under 
the  conditions  prescribed."  - 

'  See  E.  Watelet.  Les  Recents  Troubles  du  Nord  dc  la  France, 
inT2. 

"Discussion  de  la  Societe  d'Economie  Politique,  Journal  des 
Economisies,  December,   191 1. 


SOCIALISl    PROGRAMS    AND   THE    FACTS 

This  brilliant  plan  received  such  an  entlnisiastic  wel- 
come that  the  Fdincare  ministry  speedily  withdrew  it. 
The  ('(luncil  of  State  has  now  accejjted  the  principle 
that  economic  action  on  tiie  part  of  a  municipality  is 
illep;al  when  it  results  in  willful  and  systematic  restraint 
of  commerce  and  industry.  It  has  made  some  allow- 
ances in  special  cases,  hut  Wv-  hojK'  that  in  the  future 
it  will  adhere  firmly  to  the  prmciple. 


.^Q3 


CHAPTER    II 


BLUFF 


Declarations  of  luigard  Milhaiul.- -Fnumcration. — Govern- 
niciit  and  Municipal  rndcrtakiii^s  Art.-  Iradilioiis,  Xot 
Innovations. — I''ar  ironi  Hcinj;  Proofs  of  Kvolution, 
They  Are  Proofs  of  KctroKrcssion. — I-.xample:  Ger- 
many.— Postoftice. — I-"orests.— ( iolidin  I'apestrv  and 
Sevres  China. — The  Legitimate  Sliare  of  Government 
and  Municipality  in  General  i'.conomic  Activity. 


In  November.  191 1,  Fulj^jard  Milhaud,  editor  of  the 
Amialcs  de  la  Regie  Dircctc,  declared  in  that  publica- 
tion: 

"Operation  by  public  prnnps — that  i-  to  say.  grovern- 
ment  ownershii) — is  bcinf^  suijstiuitrd  iiiore  ami  mure 
for  operation  liy  individuals  or  by  private  corporations. 
In  the  field  of  municipal  operation  we  mipbt  mention 
water  supply.  ,t,'as.  electricity,  tramways,  hij^diways,  sew- 
at^e  disposal,  sanitation,  undertaking,  crematories,  mar- 
kets, department  stores,  savings  banks,  pawnshops, 
weights  and  measures,  employment  offices,  real  estate  of- 
fices, cheap  lodgings,  slaughter  houses,  public  baths,  grain 
elevators,  fish  ponds,  etc.  To-day  municipal  operation 
of  water,  gas,  electricity  and  tramways  forms  a  total 
of  3;vS  undertakings  in  Switzerland,  569  in  Italy,  and 
l,8ot;  in  the  United  Kingdom.  Water  and  gas  enter- 
prises alone  reach  a  total  of  ,^,210  in  Germany. 

3y4 


BLIFI' 

"In  the  field  of  state  tindcr'.akinps  we  would  mention 
the  postal,  teleprapli  and  telephone  systems,  railways, 
canals,  insuran'c,  title  fjuaranty  and  trust  companies, 
banks  of  issue,  mines,  salt  works  and  salt  marshes,  hydro- 
electric power,  forests,  various  manufactures  ( fiowder. 
imnmioMs  of  war,  matches,  tobacco,  tapestries,  fine  porce- 
lain, etc.),  moiio;  olies  of  several  imports  and  c\f)orts 
( llie  c.impiior  trade  with  Ja])an,  Colombian  emeralds, 
etc.).  Moreover,  one  internatidnal  fe<!erati(jn  of  na- 
tional undertakiiit.;^  was  estalilisiied  _^7  years  ago,  in  1874. 
i'liis  is  the  ^nivl•r^al  Postal  I'nion." 


M.  Milhaud  is  an  exponent  of  that  particular 
rhetorical  method  which  consists  in  producnii;  effects 
by  pilinc^  u\)  wnrds  one  on  top  of  the  other  in  such  a 
mamier  as  to  j^ivc  an  impression  of  large  (juantities 
in  face  of  really  small  ones.  If  we  arc  to  credit  his 
statement,  people  far  advanced  along  the  path  of  evo- 
lution are  finding  themselves  carried  away  by  an  irr*^- 
sistible  impulse  to  substitute  public  for  private  under- 
takings. Then  he  enumerates  these  undertakings  for 
us. 

Now  municipal  undertakings  are  by  no  means  nr)vel- 
ties ;  they  are  traditions,  at  least  in  the  case  of  public 
roads,  sewage  disposal,  cemeteries,  common  sewers, 
markets,  public  weights  and  measures,  etc.  The  a(iue- 
ducts  of  the  Romans  prove  to  us  tliat  their  water  supply 
was  a  municipal  affair.  Therefore,  as  novelties,  we 
have  the  distribution  of  gas,  electricity  and  the  tram- 
ways. 

He  quotes  Germany  as  having  the  greatest  mnnber 
of  municipal  undertakings.  These  also  are  traditic^ns 
and  not  innovations.    The  case  is  the  same  in  Switzer- 

39.T 


WHERE    AN'U    WIIV    PUBLIC    OWNEKhllll'    HAS    FAILED 


land,  where  the  jjatcrnal  policy  of  the  cantons  has  never 
established  a  definite  hniit  between  what  beldii.s^s  to  tlic 
individual  and  wlun  to  the  public  doniaitL  The  num- 
ber of  local  governments  in  the  L'nited  Kingdom 
which  have  taken  over  such  enteri)rises  is  astonish- 
ing; but  experience  is  decidedly  against  any  further 
extension  of  similar  activities  on  the  part  of  munici- 
palities. In  France,  up  to  the  present,  and  despite 
all  the  allurements  of  the  Socialists,  the  municipalities 
have  shown  themselves  distrustful. 

As  for  nationpl  undertakings.  F.dgard  Milhaud 
points  to  the  postal,  telegraph  and  telephone  services. 

The  two  last  mentioned  undertakings,  except  in  the 
United  States,  are  integral  parts  of  the  postal  system. 
The  Assyrians  also  had  a  government  postal  system, 
not  for  the  use  of  the  people,  but  for  the  service  of  the 
king.  A  similar  institution  v.as  established  and  for 
the  same  purpose  by  the  Kmgs  of  b>ance  and  other 
sovereigns.  It  is  a  government  tradition.  The  ma- 
jority of  the  raihvay  lines  still  belong  to  private  coinpa- 
nies.  As  for  insurance,  there  is  scarcely  one  system 
under  public  management  outside  of  the  municipal  fire 
insurance  in  Germany.  Because  Prussia  is  a  great 
mine  owner,  it  does  not  follow  that  that  country  is 
pointin':  out  the  future  economic  course  of  other  peo- 
ples. The  public  forests  are  a  remnant  of  the  feudal 
regime. 

Tobacco  and  match  monopolies  are  limited  to  one  or 
two  countries.  The  Gobelin  tapestry  and  the  Sevres 
porcelain  are  monarchical  heirlooms. 

In  Austria,  toward  the  close  of  191 1,  a  bill  for  the 
nationalization    of   coal   mines   was   presented.      B\\t 


BLUFF 

Superinteiulent  IlMlinatm.  rcprcGCiiting  the  govern- 
ment, ^avc  it  as  his  (ii'inioii  that  the  nationahzalujn  of 
Austrian  coal  mines  would  recjuire  an  amount  of  capi- 
tal so  extravas^^ant  that  it  would  he  impo^sihle  to  pro- 
cure it.  Ahjreover.  he  considered  that  it  would  be  a 
mistake  to  hope  for  lar^^e  results  from  >uch  nationali- 
zation, as  it  would  have  all  the  economic  defects  and 
inconveniences  of  similar  monop(jlies  everywhere.  Ihe 
project  was.  therefore,  abandoned. 

And  vet  M.  Milhaud  can  <ay :  "The  imceasing 
march  tcjward  nationalization  and  mimicipalization  is 
supported,  stimulated  and  commanded  by  econon-.ic 
evolution." 

Neither  ixovernment  nor  municipal  monopolies  are 
novelties;  they  are  antiques.  To  represent  them  in  the 
licdit  of  conscrjuences  of  modern  economic  changes  is 
to  commit  a  solecism.  They  are  not  indicative  of  evo- 
lution, but  of  retrogres^ion. 

As  a  matter  of  fact,  if  throughout  the  world  we 
(■oin[)are  the  economic  activit\-  of  pri\ate  undertakings 
with  those  of  governments,  either  local  or  state,  the  lat- 
ter appear  almost  insignificant.  The  ^^38  Swiss  mu- 
nicipalities may  be  each  in  itself  most  interesting  in  its 
public  econonuc  activities.  I'.ut  Switzerland  has  only 
3.763,000  inhabitants,  and  the  importance  of  their  ac- 
tivities is  therefore  limited. 


397 


CHAPTER    III 


RESULTS    OF    EXPERIENCE 

The  Aleagreness  of  the  Socialist  Program.— Those  Who 
Have  Office  and  Those  Who  Want  It.— The  Programs 
of  (Government  and  Municipal  Operation  Condemned 
by  I':xperience,  and  from  the  Double  Point  of  View  of 
Quality  and  Cost  of  Service.— State  and  Municipal 
Ownership  Show  Incontestalile  Inferiority.— The  Util- 
ity and  Danger  of  Such  b'.xperiments. 

Socialist  programs  arc  pitifully  ineai^re.  They 
would  not  auiounl  to  anythiiij^^  but  lor  the  weakness 
and  hunger  for  popularity  of  candidates  for  otTice  and 
the  desire  of  deputies,  niunicipal  councillors  and 
mayors  to  eliminate  their  competitors.  Political  ambi- 
tions form  the  cornerstones  of  such  i)rograms,  and.  if 
officials  did  not  find  in  them  promises  of  an  increase 
in  power  for  themselves  and  of  employment  for  their 
sons,  sons-in-law  and  nephews  they  would  vanish  in 
air. 

Against  a  wider  extension  of  public  economic  re- 
sponsibilities nothing  but  experience  stands  in  the  way. 
But  it  condemns  unreservedly  any  such  extension. 
J'Vom  the  point  of  view,  both  of  the  (piality  and  of  the 
cost  of  service,  state  and  inimicipal  ownership  show 
incontestalile  inferiority  to  |)rivate  enterprise. 

The  experiments  with  State  and  Municipal  Social- 

398 


RESIL 


OI"    f'.Xl'KRIKNCK 


isiii  have  rt'sullrd  so  (li>a--tr' msly  that  tlieir  Mppoticnts 
niij^fht  even  see  an  advantaj^e  in  hastening  and  muUi- 
plyitif^  them.  I'nfortnnately  hninan  ex])iriniLnts  are 
not  hke  those  of  a  laboratory.  When  they  occur  they 
invariahly  (Hsplace  and  break  something.  They  pro- 
voke ])assions;  they  create  conflicting  interests.  They 
exert  material  intluences  which  may  be  ruinous,  and 
moral  influences  which  can  be  even  more  destructive. 
After  men  have  become  addicted  to  habits  of  n.endac- 
ity  and  spoliation,  it  is  difficult  to  teach  them  not  to 
look  upon  the  services  that  they  render  as  pure  and 
simple  sources  of  remuneration. 


399 


CHAPTER    IV 


THE    STATE    A    DISHONEST    MAN 


I.  In  ForeisJfii  Affairs  Machiavelli  Is  Still  Our  Moral 
Guide. —  In  Domestic  Affairs  the  End  Justifies  the 
Means  for  Socialists  and  Interventionalists. — The 
Sovereignty  of  thv  "F.nd  in  \'ip\v." 
2.  Bismarck,  Ramsay  Macdonakl  and  the  Railways.— MM. 
Pclletan   and   Waddington. 

3.  Our   Professors  of   Law,   the    Heirs  of  the    Lawyers  of 

Philippe  Le  Bel. — Partial  Confiscatio:i  of  the  Railways. 
— Approval  of  the  Principle  by  Paul  Pic. 

4.  The  Agreements  of  18X3. — The  C.uaranty  of  Interest  of 

the  Orleans  and  Midi  Railway  Lines  and  M.  Barthou. 
—  Decrf^e  of  the  ( duncil  of  State. — The  Milierand 
Interpellation,  1895. — The  Political  Crisis. — Govern- 
nuiital  Disregard  of  Judicial  Decisions. — Last  Re- 
source of  the  Orleans  Com'pany. — The  Cfinfirmatory 
Decree  of  the  Council  of  State  of  July  26,  191J. — An- 
archistic Lack  of  Conscience. 

5.  Giolitti    nnd    the    Insurance    Companies. — National    and 

International  Confiscation. — .A,  Legal  L.xcusc. — M. 
Jeze. — "An  Administrative  and  Xot  a  fiscal  Monop- 
oly."— .\  Legal  L.rror. —  Precedents  for  ("onfiseation. 
— Progress  Condemns  Precedents  of  Rapine  and  \'io- 
lence. — Return  to  (  onfiscatif)n  a  Proof  of  Retrogres- 
sion.—Individual  Ownership  One  of  the  Conditions 
of  Xational  and  International  Law. — .\n  Error  of 
Fact. — Profits  of  the  Italian  Monopoly, 

6.  The    Italian    Law   of    1903. —  Repeal   of    Municipal    Con- 

cessions.—  The    Congress   of   Municipal    Undertakings. 

400 


rilK    srATK    A    DISHONKSr     .MAN 


10 


7.  The  Rambla  Tasc. 

8.  Equal  Tolls  on  the  Panama  ("anal. — Article  8  of  thi- 
Clayton-Bulwer  Treaty. — The  Kay-F  a  u  n  c  e  f  o  t  f 
Treaty. —  Exemption  of  American  Ships  Enpaped  in 
Coast  Trade.— The  I.odg-j  Hill.— Bad  I'"aith.-A  Lob- 
byist.— British  Protests. — Mr.  Taft. — Supreme  Court 
of  the  United  States. — Under  the  Circumstances 
There  Can   Be   N'o  Third   Disinterested   Party. 

9.  The  Discomfiture  of  the  Xew  York  Street  Railways. — 
Restrictive  Legislation  in  Xew  Jersey. — Police  Power, 
Private  Property,  and  Constitutional  Guaranties. 

Examples   of  a  Model    fimployer. 

1.  It  is  still  generally  understood  that  in  matters  of 
foreign  policy  the  statesman  should  have  no  moral 
guide  other  than  .Machiavelli.  In  regard  to  domestic 
affairs  the  unanimity  of  opinion  is  scarcely  so  perfect. 
Nevertheless,  statesmen  who  helieve  that  every  govern- 
ment ought  to  be  "an  honest  tnan"  are  still  the  excep- 
tion; and  not  alone  Socialists,  but  also  Interventional- 
ists  are  characterized  by  utter  ims.-rupulousness  when 
the  question  arises  of  substiluting  collective  for  indi- 
vidual action.  The  end  justifies  the  means.  To  objec- 
tions made  in  the  name  of  property  rights  and  of  re- 
spect for  contracts,  the  end  in  view  is  declared  sov- 
ereign. Let  me  cite  a  few  characteristic  tacts  in  proof 
of  such  a  statement. 

2.  Bismarck  organized  a  campaign  against  the  pri- 
vate railway  companies,  divcrlcd  irailic  fr(jm  them, 
bought  their  slock  secretly,  and  molded  public  opinion 
into  favoring  the  purchase  he  had  planned. 

The  parliamentary  chairmati  of  the  Labor  party  in 
Great  Britain,  J.  Ramsay  Macdonald,  in  a  debate  with 

401 


WHERK    AND    WHY    I'UUl.IC    OWN'IiRSHIl'    HAS    FAILED 

Hilaire  [felloe  in  Memorial  Hall  <ai(l :  "M.  Bclhjc 
pr()i)()scs  to  take  £19,000,000  (  Stjj.s^o.ooo  )  frnni  the 
excise  duties  in  order  lO  jjurchase  railways.  Railway 
stock  will  immediately  rise  to  a  niinous  fi,t,nire.  It 
wiiuld  lie  better  to  brinj:^-  down  the  value  of  the  stock 
by  an  attack  upon  their  income."  ' 

Bismarck   and    Ramsay   Macdonald   have   the   same 
moral  code  when  it  comes  to  ^r(,vernnient  action. 


In  I-'rance  Camille  Pelletan  has  declared  that  "con- 
tracts mu.^t  be  turned  topsy  tur\y"  :  and  even  moderates 
like  Richard  \\'addin'j;toti  share  his  opiniim." 

3.  Advocates  can  be  found  fur  an\  cause.  It  is 
therefore  not  strange  that  legal  experts,  descendants 
of  the  lawyers  of  Philippe  Le  Bel,  maintain  that  the 
government  can  dt)  anything  since  it  creates  the  law. 
Legalists  like  R.  Jay  nave  even  maintained  the  right 
of  the  state  h'  expropriate  private  enterprises  without 
indemnity. 

.\s  long  as  ministers  respected  the  |)hrase,  "an  hon- 
est government,"  and  were  resolved  to  hold  tcj  the  con- 
tracts by  which  they  were  bound  to  private  companies, 
thev  took  little  interest  in  the  lalior  (juestion  The 
control,  organization  and  remuneration  of  employees 
was  regarded  as  the  affair  of  the  companies  con- 
cerned, and  not  of  the  minister. 

But  in  1807  the  Chamher  of  Deputies  passed  the 
Berteaux-Ral)ier-Joures  bill,  modifying  the  labor  con- 
ditions (jf  employees  and  giving  to  them  a  legal  right 

'Labour  Leader,   May   12,   igii. 

'See  Yves  Guyot.  Les  Chcmiits  de  Per  et  la  Greve. 

402 


THE    STATK    A    DISHONKS T    MAM 

to  the  customary  prnsiim  after  _'o  \ears  of  service. 
From  that  niomciil  the  j^overniiKiit  found  itself  <lc- 
fensclcss.  Since  then  railway  employceN  have  learned 
to  go  to  their  deputies  with  their  demands.  The  dep- 
uty in  his  turn  will  hrin^  all  pos^-dile  intluence  to  bear 
upon  the  government,  which,  under  thi^  ])ressure,  will 
tamper  witi  the  existing  contracts.  ^  et,  despite  the 
cracks  in  them,  the  contracts  --tdl  hold.  I'p  to  the 
present  the  government  is  not  been  able  to  impose 
upon    i)ri\ate    companies  reinstatements    oi    dis- 

charged emplovees  to  whicn  the  -^late  system  has  been 
obliged  to  submit.  This  has  been  the  goveriunent's 
punishment  f(jr  its  lack  of  respect  for  a  contract. 

The  rights  of  the  existing  j)rivate  railways  in  hrance 
have  been  directly  threatened  b\-  a  liill  introduced  by 
M.  Augagneur  at  the  beginning  of  November,  IQ12, 
and  thus  worded : 

"Article  i. — Noniinatinn  of  each  of  the  following  rail- 
wav  officials  shall  be  submitted  for  ratification  to  tlie 
minister  of  I'ublic  Works  by  the  chairman  of  the  board 
of  directors : 

"a.  Directors,  assistant  directors. 

"b.  Chiefs  of  the  administrative,  transportation  and 
supply  departments  of  the  road. 

"The  same  rule  shall  apply  to  employees  carrying  on 
for  the  time  being  the  duties  of  the  above-named  offi- 
cials for  a  period  of  not  less  than  three  months. 

"Nominations  shall  be  made  for  a  period  of  six  years 
and  shall  be  renewable. 


".\rticle   2. — .All   modifications    of   the   administrative 
organization  of  the  roads  anfl  all  changes  in  the  duties  of 

403 


VVHIlRK    and    why    I'l'BI-IC    ()\V  NEKS  111  i'      IAS    FAILED 

the  employees   mentioned   in    Article    i    shall  be  subject 
to  'he  ratification  of  the  minister  of  Public  Works. 

"Article  3.— If,  after  a  delay  of  three  months  from 
the  date  of  the  promulgation  of  the  present  law,  or  from 
the  date  of  a  vacancy  in  one  of  the  iio-^itions  mentiomd 
in  Article  i.  the  minister  has  not  been  able  to  ratify 
the  names  projjosed  by  the  com])anies,  he  shall  proceed 
with  the  duty  of  nomination  himself. 

"The  same  rule  shall  hold  if  the  ratification  of  the 
names  projiosed  by  the  companies  has  not  been  made 
within  three  months  preceding  the  normal  end  of  the 
term  of  office  of  the  employees  mentioned  in  Article  i 

"Article  4.— .^fter  a  delay  of  six  months  from  the 
date  of  the  promulgation  of  tlie  preseiU  law.  ihe  com- 
panies   shall   present    for   the   approval   of    the   minister 

of  Pu')lic  Works: 

"l.  The  regulations  governing  the  administrative  or- 
ganization of  cacii  line; 

"2.  The  regulations  governing  the  methods  of  recruit- 
ing and  promotion,  as  well  as  the  salary  list,  of  em- 
ployees ; 

"^.  Tl..^  regulations  governing  organization  and 
methods  of  procedure  of  th  councils  of  discipline  and 
the  comn.issions  on   reforms. 

"All  modifications  of  the  regulations  so  approved  must 
likewise  be  ratified. 

"In  any  case  where  the  ratification  above  provided  for 
is  accorded  only  after  reservations  involving  modifica- 
tions or  additions  not  accepted  by  the  company,  the 
question  shall  be  decided  by  a  decree  of  the  Council  of 

State. 

"Infractions   of  the  present  law  shall   be  prosecuted 


rilK    M  \  1  !■      \    DISHONEST     NfAN 

and  [juiii-iiffl  in  confoi  niilv   uilli  the  provisions  of  Sec- 
tion 111  nf  the  '  hduiancc  of  N'm  iinlxT  15,  1846." 

1  In-  ahovf  plan  oi  partial  contiscatioii  is  a  hold  vio- 
lation of  ihr  coniracl.s  between  the  governincnl  and 
the  companies.  Xevertheless,  i'aul  I'ic,  professor  of 
industrial  law  at  l.yon.  does  not  hesitate  to  declare 
that  "this  measure  is  ui  Uself  perfectly  justifiable." 
.As.  however,  "it  would  run  the  ^i^k  of  leadinj.^  us  nito 
a  precipitate  purchase  of  all  the  lines,  as  well  as  nn 
account  of  the  strenuous  resistance  of  the  conijjanies.  " 
he  advises  a  delay.' 

4.  Few  ministers  have  any  desire  to  adhere  hyvallv 
to  the  contracts  of  i.SS:;  with  the  railwav  compaTiies. 
In  1894  .M.  I'.arthou,  tliui  minister  of  I'ublic  Works, 
on  the  occasion  o!  a  bond  is^i;e  bv  llu-  ( )rleans  line, 
ordered  the  conipa  ly  to  adil  to  the  notices  relative  to 
the  guaranty  of  interest  an  announcement  that  this 
guaraut\  would  ex])ire  in  1914.  The  coni[)any  re- 
ferred the  (|ue-iion  to  the  (  oiuicd  of  Slate,  holdin.tj 
th.at  the  ,<,n)vernment  had  .i,'ranted  this  guaranty  not 
only  up  to  I9I4-  'nit  to  the  expiration  of  its  franchise. 
in  I95().  I)y  a  decree  of  January  il,  1895,  based  on 
opinions  rendered  by  M.  Mayliel  and  M.  Jagerschmidt, 
the  council  of  state  handed  down  a  decision  in  favor 
of  the  company. 

We  give  the  final  summing  up  and  the  provisions 
of  this  decree  of  1805: 

'Tnder  the  circumstances,  it  must  he  acknowledged 
that  the  gnarantv  of  the  railwav  company  from  Paris  to 

'  f.cx  Griir.dcs  Rc,)ics  d'f.tjt.  tiy  Paul  Pic,  Revue  d'Economie 
Pcliiiquf.   July-August.    KJI2. 


WHF.RF.    AND    WHY    IMIU.IC    mVNKKSHIl'     HAS    1AH.ED 

Orleans  hns  ;i  jHTio'l  to  luii  ii|u,il  to  tliat  of  its  fran- 
chise, and  that,  liv  rcfiucstin^  the  rom])any  to  specify 
upon  its  bomls  that  this  ^'uaraiily  will  end  on  December 
31,  1(>14,  the  minister  of  Public  \Vork-  has  misinterpreted 
the  rifjhts  of  the  company  arising,'  from  the  contract  of 
June  jS.  iSSv  ll  i^  decided,  therefore,  that  the  order 
of  the  minister  directing  the  comi)any  to  add  to  its 
notices  relative  to  the  ^maranty  of  bonds  an  announce- 
ment that  this  guaranty  will  exjiire  December  31,  1914. 
be  annulled." 

Instead  ■  subinittins  gracefully  to  this  decree.  M. 
P.artliou  iKUuL'd  ni  his  resignation  a-  minister  of  Pub- 
lic Works.  On  January  14.  M.  Millcrand  called  Min- 
ister Uupuy  to  account  as  having  failed  in  his  duty  in 
not  enforcing  the  ministerial  order,  and  ultimately  the 
Dupuy  ministrv  fell  because  it  refused  to  disobey  the 
decree  of  the  Council  of  State  even  at  the  urgent  de- 
mand of  its  party.  Thus  the  Council  of  State  over- 
threw a  minister  and  afterward  a  ministry,  while  the 
affair  led  further  to  the  resignation  of  Casimir  Peritr, 
President  of  the  Republic. 

The  Chamber  of  Dei-aties,  in  order  to  appear  to  be 
doing  something,  appointed  a  cotnniission  charged 
with  discovering  whether  there  was  any  cause  for  the 
prosecution  of  M.  Raynal.  who.  as  minister  (jf  Public 
Works  in  1883.  had  signed  the  original  railway  con- 
tracts, for  high  crimes  and  misdemeanors  conmiitted 
during  his  term  of  public  office.  In  conformity  with 
the  unanimous  opinion  (jf  the  members  of  the  commis- 
sion, M.  Raynal  was  not  prosecuted. 

Despite  the  definite  character  of  the  decree  of  1895, 
the  ministry  of  Public  W  orks.  in  an  official  publication 

406 


THE   STATE   A    DISHONEST    MAN 

of  the  Statisticjtic  dcs  Clicmins  dr  l-'rr  I'ran^ais,  sub- 
division ().  hi-ariiijj;  the  titl''  '(inditiaiis  rrincipaU'S 
dcs  L\>nci\ssi'i>iis.  ha<  ("iitiniUM,  .o  dcclart'  that  tiu'  guar- 
anty period  of  the  ( )rli'ans  and  the  Muh  companies 
wiiuld  e.\j)ire  DtccinhLT  _^  i .  i<;i4. 

(  )n  Martli  lo.  in  the  C,hanil)er.  Maurice  Sibille  hav- 
inj^  rclirrt'ii  to  the  claun  ot  the  j^overnnicnl  that  the 
j^uiaranl}  would  expire  Deceuiher  31,  i(;i4.  the  minis- 
ter ot  I'inance  exclaimed  ;  '"  There  is  no  que^tlon  ahout 
it."  TlniN  we  >ee  the  iiiini>iry  testifying  to  its  exalted 
respect  for  the  deci>ioii  of  the  Council  of  State. 

In  the  belief,  however,  that  the  (|uestion  had  been 
settled  b}-  the  decree  of  iSi;;.  but  wishing  to  avoid  any 
niisundertanding  as  t(;  its  credit,  the  Orleans  company 
demanded  fr. 'Ui  the  mini'^ter  authority  to  publish  u\)(m 
its  bonds  a  notice  indicating  that  the  guaranty  would 
expire  on]\'  with  the  franchise  in  195'^).  l'])on  the  re- 
fusal of  the  mini>ter.  the  case  went  back  again  to 
the  Coiuici!  of  State,  which,  by  a  decree  rendered 
July  j6.  h;ij,  decided,  as  in  its  previous  decree  of 
1895,  in  favor  i^i  the  company. 

The  position  hnally  taken  by  the  ministry  was  that 
litigation  ctndd  not  be  consideretl  as  existing  in  fact 
until  1914,  the  \  car  which,  according  to  the  govern- 
ment, would  see  the  end  of  the  guaranty. 


5.  In  Italy,  as  we  have  already  seen.'  M.  Giolitti 
was  anxious  to  follow  the  example  of  Germany, 
France  and  Great  Britain  in  establishing  <ild-agc  jjen- 
sions.  But  where  should  he  find  the  resources?  Noth- 
ing simpler.     The  insurance  companies  were  earning 

'  See  above,  Book  1,  Chapter  23. 


W  lIKKi;    AND    Win     ITlil.lC    OWM.K:  .111'     ll.\>    lAll.ED 


dividends.      TIr-  state  must  force  them  out  and  sub- 
stitute itself  ior  them. 

While  shrewd  Socialists  were  disputing  whether 
the  various  ])hases  of  expn  priation  should  he  brought 
about  with  or  witlioiit  iiukninity.  \1  '  iiohlti  iK-iided 
the  <iuestioii:  Xo  indemnity  for  existing  insurance 
cowipanies.  The  Italian  companies  were  forced  to  bow 
before  the  "mightier  than  thou"  of  the  t;ovornmon!. 

But  it  was  (|uite  another  matter  in  the  case  of  the 
foreign  insurance  coni[)anics.  The  Italian  govern- 
ment, hcjwcvcr.  remained  deaf  to  the  protests  of  the 
English,  French  and  (lerman  governments. 

This  abuse  of  power,  as  a  preliminary  to  the  insur- 
ance law,  inspires  no  great  conliilence  in  the  go\cni- 
ment's  res])ect  for  ;Hi|uired  riuht-  Moreover,  why 
should  this  respect  be  any  greater  with  regard  to  those 
wh(  nsure  themselves  with  the  ^tate]-  The  seizure  by 
the  I'Teiich  go\ernnKnt  of  the  fuixN  of  the  "Invali- 
des"  '  is  notorious.  I'ndoubtedly  the  major  part  of 
the  returns  from  the  monopoly  will  go  into  the  cofTers 
of  the  Italian  go\ eminent. 

The  Italian  governmeiU  refused  all  c<.mpensation 
to  foreign  companies,  judging — and  rightly — that 
their  several  governments  would  not  go  to  war  over 
so  small  a  question  and  that.  conse(iuently.  it  need  take 
no  account  of  protests  nor  admit  of  any  international 
jurisdiction.  Thus  its  Socialist  character  is  given  the 
final  |;^nch  au'l  ;n<iof  is  given  thereby  that  expropria- 
tion without  indemnity  may  be  not  only  national  but 
internaiional. 

According  to  M.  Jeze,  proiessor  of  financial  law  in 


'  A  navv   relief  fund. 


40« 


THE    STATU    A    UlsHON'ESl     MAN 

the  University  of  Paris,  if  the  affair  had  been 
bnmijht  ln-foro  the  tribunal  at  The  lla^nie,  Italy  "could 
claim  that  the  monopoly  so  C(jnstituted  is  an  adnnnis- 
trative,  and  not  a  fiscal  monopoly,  as  an  excuse  for  not 
havinj;  paid  an  indemnity.'' 

I  respect  M.  Jeze's  opinion.  But  from  the  point  of 
view  of  the  wronsx  done  me  by  the  state,  what  differ- 
ence does  it  make  what  excuse  the  state  offers  mo? 
According  to  the  premise  of  M.  jcze,  the  state  would 
have  the  rii,dit  to  coniiscate  anything  from  which  it 
could  draw  a  profit.  The  state  could  seize  my  meadow 
to  set  up  target  practice  without  paying  me  anything. 
Article  545  of  the  Civil  Code  says:  "Xo  one  can  he 
(•(impelled  to  give  up  his  jiroperty  except  in  behalf  of 
the  public  interest  after  a  just  compensation  has  been 
paid."  I'jusiness.  the  foundation  of  cominerce,  con- 
stitutes property  as  certainly  as  real  estate.  The  state 
has  no  more  right  to  confiscate  the  one  than  the  other 
under  any  system  which  rests  on  respect  for  private 
property. 

M.  Jeze  relies  for  a  precedent  (m  the  prohibition  of 
the  use  of  white  lead,  which  resulted  from  a  serious 
agitation  on  the  part  of  a  numb<  -  of  competitors  con- 
ducted liy  a  member  of  the  Labor  Confederation.  The 
whole  matter  proved  nothing  but  the  shameful  cow- 
ardice of  the  French  Parliament.^  The  prohibition  of 
die  use  of  white  phosphorus  in  the  manufacture  of 
matches  is  based  on  a  foolish  prejudice  contradicted  by 
the  facts  .\s  for  the  prohibition  of  the  sale  of  ab- 
sinthe, it  must  be  acknowledged  that  that  one  act  on 

'  Yves  Guyot,  La  Ceruse  et  la  Methode  Experimentale.  Bro- 
chure, Paris.  F.  Alcan. 

409 


WHERK    AM)    Win     I'LitLU;    r  W  N  L:K.illir    HAS    I-'AILED 


the  part  of  tlie  state  does  coiistitutc  a  precedent  in  fa- 
voi  (.1  the  arguments  oi  .M.  Je/c  :  but  human  ])rogress 
in  all  the  epochs  cif  histnry  condemns  precedents  of 
rapine  and  violence  con.milteil  1)\  governmenis  against 
individuals.  ,\  return  to  the  medi;i'\al  customs  of  con- 
fiscation can  indicate  nothing  but  retrogressiijn. 

M.  Jeze  is  right  in  thmkmg  that  the  linutati(jn  ui 
hours  and  working  day.-,  as  well  as  the  minimum 
wage,  are  partial  conl!scati(jn.  Hut  he  is  also  present- 
ing a  formidable  argument  aganist  all  legislaticjn  called 
social,  which  is,  i;i  fact,  (jnly  a  step  toward  the  sup- 
pression (if  individual  property  and  the  introducli(jn 
of  Socialism.  Our  codes  are  still  foimded  on  respect 
for  personal  property,  however,  and  he  acknowledges 
that  such  respect  is  one  of  tlie  int!is])ensal)le  conditions 
of  intcrnati<jnal  law. 

Therefore  the  Italian  government  ha>  been  guilty 
of  an  al)nse  of  power  in  confiscating  the  business  of 
life  insurance  companies:  and,  in  the  case  of  the  for- 
eign companies,  at  least,  it  owes  them  some  reparation. 

The  argument  that  the  Italian  government  did  not 
expect  to  draw  any  profit  from  the  insurance  monop- 
oly is  inaccurate.  If  there  had  been  no  hojie  of  reap- 
ing any  jirofit  the  monopoly  would  never  have  been 
created. 

Article  14  of  the  law  provides  that  there  shall  be 
taken  out  of  the  net  annual  profits:  (a)  A  sum  of  at 
least  I  per  cent.,  which  shall  be  devoted  to  the  ordi- 
nary reserve:  (b)  a  sum  to  be  applied,  in  conformity 
with  the  statutes,  to  the  guaranty  reserve  and  any  other 
contingent  reserve;  (c)  a  sum  to  be  assigned  to  the 
administrative,   technical,   and   soliciting  staff  of   the 

410 


THE    STATE    A    DISHONEST    MAN 

iHiiKi.  This  Mir.i  shall  be  less  than  5  per  cent.  The 
remainder  of  the  jirofits  will  be  paid  into  the  National 
Insurance  roerve  lor  invalid  and  ajjjed  working-men. 
The  i)rofilh  of  the  National  ITind  are  to  be  exempt 
frtim  the  income  tax. 

Thus  the  law  indicates  in  every  line  that  the  mo- 
nopoly is  expected  to  be  proiitable.  Xoi  onlv  does  ii 
dispone  of  these  j^rotits  but  it  exempts  them  from 
taxation. 

Tn  tlie  Bulletin  dc  i Institute  International  d'.hjri- 
ciilture,  edited  in  part  under  the  direction  of  the  minis- 
try of  \,c;ricnlture,  I  tind  an  article  which  proclaim^ 
the  new  law  to  the  world  in  the  following  i)hrases : 

"The  ultimate  purpose  of  the  new  law  is  to  create 
another  source  of  revenue  for  tin.-  ^(incninient  by  the 
monopoly  on  life  insurance."     (May.   \^)\2,  page  51.) 

In  the  light  of  these  cxceri)ts.  what  becomes  of  the 
argument  of  AI.  Jeze.  based  on  the  disinterested  aims 
of  the  life  insurance  monopoly? 

The  same  article  aiso  contains  the  statement  that 
the  law  is  designed  "especially  to  devote  the  profits 
arising  from  this  monoijoly"  to  the  insurance  fund  f(jr 
pensions. 

M.  Jeze  has  set  down  an  error  of  fact  in  order  to 
ji.stify  a  legal  theory  based  on  nothing  but  a  casuist's 
distinction. 


6.  The  law  of  March  29.  1903,  gives  to  the  Italian 
local  governments  authority  to  buy  u]j  franchist  ^  what- 
ever may  be  the  time  they  have  still  to  run      M.  Gio 
litti.  the  author  of  the  law,  said  :    "This  is  not  a  ques- 

4" 


WHERE    AND    WHY    I'lr.LIC    OWXERSHIP    HAS    FAILED 


tinn  of  expropriation,  nor  of  lease,  but  a  question  of 
the  repeal  of  a  franchise  in  the  public  interest:  and 
thi^  'lifference  permits  us  to  be  more  liberal  toward 
the  municipality  which  makes  use  of  its  full  right  of 
a])peal."' 

What  is  this  right  of  appeal,  except  the  breaking  of 
a  contract  by  one  oi  the  jiarlies  to  it?  And  because 
it  suits  the  convenience  of  thi^  jtarty  to  break  the  con- 
tract, it  is  nece^sar\■  ""to  be  very  liberal  with  it."  What 
are  the  guaranties  (^f  the  other  jiarty  ? 

Article  J I  declares  that  the  right  of  repeal  exists 
after  a  third  of  the  period  of  the  full  duration  of  the 
franchise  may  have  elapsed  ;  in  any  case,  attt.  jo  years. 
but  ne\er  befcre.  '1  he  aiticle  adds  tb;it  municipalities 
mu^t  i)av  an  e(|uitable  indemnity  in  which  the  follow- 
ing items  shall  he  taken  into  account: 

I'irst :  Tbe  \alue  of  the  installation  and  its  e(|uip- 
menl.  Second:  ,\dvances  and  subsidies  jiaid  on  pre- 
mium-' bv  the  municipality,  'third:  Loss  of  prints  re- 
duceil  I"  the  i>re.-.ent  \alue  (at  the  legal  rale  of  inter- 
est )  (if  ;nuuuil  stuns  eijual  to  the  average  of  the  profits 
lor  the  ti\  e  years  last  past  for  as  many  years  as  the  con- 
cession has  still  to  run.  the  luimber  of  years,  neverthe- 
less. uiA  to  be  lU' ire  than  twenty--the  amount  of  these 
annual  sum-  tn  be  b.i-ed  ou  the  average  of  the  net  rev- 
enues reported  in  the  iicrsonal  property  tax  declara- 
tions, omitting  the  nciT'  cf  maxituimi  and  minimum 
profits  and  deducting  interest  on  capital. 

.\t  the  first  congress  of  Italian  nuinicipal  undertak- 
ings a  lawyer.  Pavid  I'errari,  jjrotested  in  a  long  re- 
jiort  against  the  third  jiaragraph  of  the  article  above 
quoted,  niiieh  he  declared  opposed  to  the  spirit  of  the 

412 


THE    STATE    A    DISITONEST    MAN' 

law.  The  profit  arises  from  the  concession.  When  the 
concessiiin  ceases  so  does  the  jjrofit.  Therefore,  tlie 
"basis  of  the  aeeiinnilaf ion  of  snrphis  protits  by  reason 
of  the  (liiralitin  of  the  concession"  oUL;ht  to  be  struck 
out.  .Vnotlicr  lawver,  ^b'lrio  Cattaneo.  was  astonished 
"that  on  the  sole  ground  that  one  of  the  parties  was  a 
pubhc  1  odv  such  an  attack  could  be  made  on  the  doc- 
trine of  ihe  inviolability  of  private  property."  lie  de- 
manded, therefore,  that  "resjiect  be  sh<iwn  in  the  case 
of  existinj:^  contracts  to  all  the  rules  of  private  law," 
and  that  the  bill  be  applied  to  future  contracts  only. 
The  congress  adopted  unanimously  the  conclusion  of 
the  I'"errari  report,  demanding  that  "the  basis  of  the 
accumulation  of  suri^lus  profit  by  reason  of  the  dura- 
tion of  the  franchise"  be  omitted. 

During  the  second  congress,  held  in  Rome  in  June. 
191 1,  Giovanni  Montemartini,  attached  to  the  mayor- 
alty of  Rome,  insisted  upon  the  necessity  of  still  fur- 
ther modifying  the  law  of  1903. 


7.  Here  we  have  a  new  example  of  government  mo- 
rale: 

The  president  of  Iruguay.  M.  Rattle  y  Ordonez, 
a  partisan  of  the  extension  of  state  activities,  desired 
to  establish  a  national  bank.  Then,  in  order  to  give 
his  bank  the  credit  indispensable  to  institutions  of  simi- 
lar character,  he  proceeded  to  teach  ever\body  what 
fools  they  would  be  to  trust  to  contracts  entered  into 
with  Uruguay  by  giving  them  an  object  lesson  in  the 
so-called  "Rainbla  affair." 

Now  a  tyrant  can  do  many  things — anything  he 
may  choose,  if  you  will.     But  a  state,  however  tyrau- 

413 


WIIERK    AND    WIIV    PUBLIC    OWNERSHIP    HAS    FAILED 


nical  it  may  be  in  sjiirit.  may  txime  in  contact  with  one 
insurnu)untal)le  obstacle.     (  (inridencc  cannot  be  forced. 

The  trouble  which  has  arisen  between  the  Rambla 
Company  and  tlic  government  of  I  rn^'uav  has  served 
to  prove  that  the  latter  lias  either  never  heard  of  or 
never  pondered  the  ])recept  of  M.  Thiers:  "The 
state  must  act  like  an  honest  man." 

In  June,  1913,  the  Matin  published  an  account  of 
the  Rambla  affair,  which   I  summarize : 

In  i()io  an  Anj^lo-brench  association,  known  as  the 
Rambla  t"omi)any,  had  renewed  a  franchise  and  a  con- 
tract datin,s^  from  1809.  Its  object  was  the  ac(iuisition 
of  145  hectares  (  _8  acres)  close  to  tlvj  sea  for  the 
construction  of  a  pul/iic  promenade  (Rambla). 

Of  the  42,500,000  francs  which  the  work  was  to 
require,  35,000,000  francs  was  guaranteed,  capital  and 
interest,  by  the  state  of  Uruguay. 

There  appeared  to  be  entire  harmony  among  the 
parties  to  the  affair:  yet.  at  the  last  moment,  the  L'ru- 
guayan  governn.ent  refused  to  sign  the  contract  imless 
an  article  (  Xo.  3  ).  containing  an  acknowledgment  on 
the  part  of  the  company  of  the  right  of  the  state  to  in- 
troduce such  modifications  into  the  plans  as  it  should 
deem  fitting  were  inserted. 

That  the  c^  >mi)any  was  imprudent  enough  to  con- 
sent to  this  clause  has  never  been  denied ;  but  it  had 
this  excuse  at  least.  It  trusted  the  state  to  act  like 
an  honest  man. 

The  utter  lack  of  any  basis  for  such  confidence  was 
almost  immediately  pnned  when  the  state  issued  a 
decree  adding  to  the  specifications  the  taking  over  by 
the  company  of  137  hectares  (338  acres)   facing  the 

414 


THE    STATE    A    DISHONEST     MAN 

sea,  80  hectares  (  i()8  acri>  i  nt"  which  it  put  up  for  sale. 
The  minister  of  Puhhc  Works  called  this  a  slij,'ht  iiiocli- 
fication. 

l"he  company  has  determined  to  resist  the  demands 
of  the  government  of  I'ruguay.  and  has  claimed  the  in- 
tervention of  the  English  and  French  governments. 
These  governments  can,  of  course,  enter  remon- 
strances, hut  it  would  be  a  mistake  to  hope  for  much 
etTect   from  them. 

The  party  most  interested  in  not  violating  its  con- 
tract would  seem  to  be  Uruguay,  for  the  prnicipal 
guaranty  that  foreign  creditors  or  parties  to  contracts 
vvith  the  state  have  is  the  self-interest  of  every  gov- 
ernment in  not  ruining  its  own  credit. 


8.  The  I'nited  States  has  always  considered  that  a 
canal  between  the  Atlantic  and  Pacific  (jceans  was 
among  the  probabilities  of  the  future.  In  1835  the 
Senate  ordered  the  President  to  open  negotiations  witli 
the  goverir.r.ents  of  other  nations,  and  more  especially 
with  those  of  Centra!  America  and  New  Granada,  with 
the  object  of  giving  efficient  protection  to  the  promo- 
ters of  such  a  canal. 

A  similar  resolution  was  adopted  by  the  House  n\ 
Representatives,  in  183Q.  following  a  j^etition  from  the 
merchants  of  New  York  and  Philadelphia.  In  i84() 
ratifications  of  a  treaty  between  the  rnited  States  and 
the  Republic  of  New  Granada,  subsefpiently  and  suc- 
cessivelv  known  as  the  United  States  of  Colombia  and 
the  Republic  of  Colombia,  were  exchanged,  of  which 
the  principal  provision  was  the  gnnranty  of  the  neu- 
trality of  the  Panama  Canal, 

415 


VVHKRK    AM)    U'lIV    IM'HI.FC    o\v  \KRS  1 1 1 1'    II  \S    KAII.En 

April  i(>.  1830,  Jt)hn  M.  Clayton,  serretary  of  state, 
and  Sir  Henry  Bulwer-Lytton,  Rritisli  minister  to 
W'ashinc^ton,  siii^ned  the  treaty  relative  to  the  canal  that 
an  American  company  had  undertaken  to  construct  by 
makinc^  use  nf  the  St.  John  K'iver  of  .\'icara.<,nia.  This 
treaty  specified  that  the  I'nited  States  should  act  as  a 
trustee  for  the  other  nations,  but  that  all  the  nation^ 
should  have  the  same  pri\ile<.,a's  in  the  u>e  of  the  canal. 
In  transmitting  this  treaty  to  the  Senate  President  Folk 
emphasized  the  provision  lor  ecpial  rights,  assured  by 
Article  8  of  the  treaty. 

This  .\rticle  8  was  again  expressly  endtjrsed  in  the 
declaration  preceding  the  I  Iay-1'auncefote  treaty,  con- 
cluded on  November  18,  ic^oi,  when  the.American  gov- 
ernmeni  Umk  u\er  the  com])letion  of  tluranama Canal. 
Moreover,  il  had  been  pre\iously  conHrmed  by  the 
declaration  of  Tresident  Cleveland,  m  his  message  of 
1885: 

"Any  passage  of  communication  between  the  two 
oceans  ouglit  to  recLund  to  tlie  advantage  of  the  entire 
world  for  llie  l)enefit  of  humanity.  It  ought  to  be  re- 
moved irorn  all  ri>ks  of  (hjmination  by  a  single  power. 
It  ought  never  to  become  an  occasion  for  hostility  or  the 
prize  of  warring  ainbiiions." 


Nowhere,  in  the  various  diplomatic  acts  oi  the  Uni- 
ted States  can  there  be  found  an\-  reserve  in  favor  of 
special  advantages  for  certain  ships  oi  certain  nations. 
Nevertheless,  in  the  House  of  Representatives  and  in 
the  Senate  of  the  Cnitctl  States,  in  the  summer  of 
19 1 2,  various  proposals  were  discussed  lool.ng  to  the 

416 


THE    STATK    A    DISIloNF.ST    MAN 


2xeiir,'i"n  of  American  ships  from  the  tolls  which 
nil'!-:  he  i)jid  by  the  ships  of  other  iiati(,ins. 

Fmaliy  the  House  (jf  Representatives  adopted  a 
resolution  declaring  that  no  toll  should  he  levied  ujjon 
American  ships  engaged  in  the  coa>ting  trade.  Later 
another  clause  was  introduced  into  the  hill  [iroviding 
"that  no  toll  shall  he  levied  up<jn  American  ships. 
which,  while  engaged  in  the  transjjort  of  merchandise, 
can  be  recpiisitioned  by  the  President,  with  the  consent 
of  the  owners,  in  case  of  war  or  public  need."  Sena- 
tor Lodge,  in  the  month  oi  December,  191 1,  had  sug- 
gested even  more  skilful  tactics :  American  ships 
passing  through  the  canal  should  indeed  pay  duties; 
thus  the  Hay-Pauncefote  treaty  would  be  respected  to 
the  letter.  But  the  I'nited  States  should  reimburse 
these  ships  at  the  public  expense.  For  a  long  time  the 
protectionists  had  been  demanding  subsidies  for  the 
United  States  merchant  marine.  The  occasion  was. 
therefore,  too  good  to  be  lost.  The  other  nations  could 
scarcely  protest  against  a  granting  of  subsidies  to  her 
merchant  marine  by  the  United  States. 

"All  these  schemes  to  escape  the  obligations  of  the 
treaty."  says  the  New  ^'ork  Journal  of  Commerce, 
"will  be  considered  as  acts  of  bad  faith.  The  cam- 
])aign  for  the  violation  of  the  Hay-Pauncefote  treaty 
has  been  engineered  by  a  lobl)yist.  who  receives  a  salary 
of  $25. OCX)  a  year,  and  unlimited  credit  with  the  mem- 
bers of  Co!  ,,ress." 

In  order  to  justify  them  appeal  has  been  made  to  the 
]\ronroe  Doctrine,  but  Monroe  never  dreamed  that  the 
doctrine  bearing  his  name  would  ever  be  given  such 
a  broad  construction. 

417 


U  lUUI.    AM)    UHN     I'UULIC    UVVNERSHIl'    HAS    FAILED 


The  hill,  as  finally  passed  by  the  House  of  Represen- 
tatives, extended  that  provisicm  of  the  Interstate  ("om- 
nierce  Act  which  forhids  any  railway  company  to  have 
an  interest  in  "any  method  of  water  transportation" 
which  "is  or  can  he  a  competitor."  However,  the  Sen- 
ate justly  decided  tliat  there  was  no  analoj,^}-,  and 
there f(jre  siih^tiluterl  for  that  particular  clause  the  fol- 
lowing;; provision  :  "Xo  ship  possessed  or  controlled  by 
a  railway,  or  in  which  a  railway  may  have  any  in- 
terest, will  he  admitted  int(j  the  canal,  if  it  is  engaged  in 
the  I'nited  States  coast  trade." 

On  the  strength  of  the  Hay-l'auncef(jte  treaty 
Great  Britain  addressed  a  prcjte^t  to  the  I'nited  States 
government.  The  Secretary  of  Stale,  Mr.  Knox, 
transmitted  it  to  the  senate: 


"According  to  the  document  in  question,  the  govern- 
ment of  his  Uritannic  .Majesty  is  of  opinion  that  the 
act  exempting  the  .\merican  merchant  marine  from  the 
payment  of  duty  would  constitute  an  infraction  of  the 
Treaty,  and  that,  if  the  duties  wore  only  collected  in 
order  to  be  immediatelv  refunded,  the  ])rinciple  would  be 
the  same  as  though  these  duties  were  altogether  abol- 
ished. 

"The  opinion  is  also  expressed  in  this  document  that 
to  collect  duties  in  order  to  refund  ihem  immediately, 
although  ncjt  contrary  to  the  letter  of  the  Treaty,  would 
be  in  opijosition  to  its  spirit.  It  is  admitted  that  there  is 
nothing  in  the  I  Iay-1'aimcefote  Treaty  which  prevents 
the  I'nited  States  from  subsidizing  its  merchant  marine, 
but  it  is  claimed  that  a  great  ditYerence  exists  between 
a  general  subsidy  of  the  entire  merciiant  marine  and  ihat 
of  a  part  only,  engaged  in  a  sj)ecial  I)ranch  of  the  service, 
and  a   proportional   subsidy   reckoned   according  to  the 

418 


THR    STAII-:    A    nrSHONEST 


MAN 


frequency  of  the  passages  tliroiit^Mi  the  canal  of  the  ships 

so  subsidized. 

"Such  a  subsidy  couM  not.  in  the  opinion  of  the  gov- 
ernment  of  his  Britannic  Majesty,  be  in  conformity  with 

the  ohht^ations  of  tiie   iVeaty. 

"In  so  far  as  the  bill  exempting  tlie  ships  enpaped  in 
the  coastmpr  trade  is  concerns  I.  the  document  declares 
that  no  oI)jection  would  he  made  if  navigation  were 
organized  in  such  fashion  that  oidy  those  ships  actually 
devoted  to  the  coasting  trade  reserved  for  .American 
ships  would  benefit  by  this  exemption.  It  appears,  never- 
theless, that  the  government  of  his  Majcstv  considers 
as  mipossible  the  establishment  of  regulations  tending 
to  discriminate  between  coastwise  and  other  .American 
ships:  consequently  this  exemption  would  be  an  infrac- 
tion of  the  Treaty." 

The  I'nited  States  Senate  voted,  by  a  large  majority. 
August  8.  iqi2,  in  favor  of  the  clause  exempting  the 
ships  of  the  Tnited  States  engaged  in  the  coasting 
trade  from  all  tolls. 

Moreover,  the  majority  which  voted  for  the  viola- 
tion of  the  Ilay-Pauncefotc  Treaty  declared  that  it 
would  refuse  to  submit  the  question  of  treaty  violation 
to  arbitration.  Its  members  declared  that  "this  (pies- 
tion  is  not  a  diplomatic  one."  under  the  pretext  that 
the  exemption  concerned  only  American  ships  engaged 
in  the  coasting  trade;  and  thai  it  was,  therefore,  a 
question  of  a  domestic  nature,  of  no  interest  to  any 
torcign  power,  and.  consequently,  does  not  come  under 
the  jurisdiction  of  The  Hague  tribunal.  It  is  easy  to 
understand  why  the  majority  of  the  .senators  waived 
arbitration    m   this    connection.      The    United    States 

419 


wiiiui'   an;     v\ii\    I'l'Ui.K    owNi-.K^ii  II'   II  \-^   1  \ii.i;i) 


Would  have  found  itself  alone  on  the  one  skIc  and  all 
the  rest  of  the  world  on  the  other. 

'The  whole  situation  has  been  summed  up  in  the 
clearest  possiiiie  manner  by  Senators  Root  ot  Xew 
York,  lUirton  of  Ohio,  and  McC'umher  of  Xorth  Da- 
kota, all  of  whom  made  the  antithesis  perfectly  clear: 
After  havir.fj  acceiJted  everv  advantaj^e  of  the  Hay- 
I'auncefote  treaty,  the  I'nited  ."^tates  refuses  t(j  accept 
any  of  its  responsibilities. 

But  Senators  Cummins,  Works,  and  Chamberlain 
answered  without  the  smallest  attempt  at  a  hypocriti- 
cal softenint,'  of  their  ari^ument  : — "TIk  I  lay-I'aunce- 
fote  treaty  has  done  nothing  for  us,  and,  as  it  is  in  our 
way,  there  is  nothinj.^  to  do  l)ut  to  break  it." 

The  Lii'cn'nuj  J'ust,  of  Xew  N'ork,  was  entirely  right 
in  saying:  "The  vole  of  the  Senate  does  a  greatc  in- 
jury to  the  Lnited  States  than  that  which  would  have 
resulted  from  a  naval  defeat  in  tlie  waters  of  Colom- 
bia." It  is  true  that  it  is  only  a  moral  defeat;  and  un- 
scrupulous Machiavellis  will  never  be  able  to  under- 
stand the  harm  that  a  defeat  of  this  nature  can  bring 
to  their  country  because,  as  a  general  rule,  the  conse- 
f|uenccs  are  not  felt  until  a  long  time  afterward. 

This  was  the  time  for  Mr.  Taft  to  show  himself  a 
great  statesman.  But  the  dispatches  immedialeh  an- 
nounced that,  if  the  Senate  and  the  House  of  Represen- 
tatives were  in  accord,  he  would  sign  the  bill  while 
recognizing  the  right  of  foreign  states  to  appeal  to 
the  Supreme  Ct)url  of  the  Cnited  States. 

It  is  now  announced  that  Mr.  Wilson  will  not  follow 
the  exan;i)lc  of  his  predecessor.  We  must  give  him 
credit  for  that. 

420 


THE    ST  ATI;    A     l)l-!I()N'i:sr    MAN 

T  ha\c  the  ntiiiMvt  nspcct  U<r  tlu-  Supreme  Court,' 
hut  this  Sui-Tcinc  ("ntu't  !•«  cnnipusi'd  nt  uiric  American 
ju(lf,'es,  sittinj:^  in  .\nn.TiLa,  and,  in  this  particular  case, 
its  jud^^Mucnt  nin-t  necessarily  he  tiu<^ed,  and  verv 
stmnijly,  with  an  excn^.-ihlc  hias.  It  fdrnis  :i  part  of 
fine  of  the  jiarties  to  the  i<>ue,  and  it  cannot  he  con- 
sidered as  a  disinterested  third  partv. 

It  is  true,  and  this  is  the  weakness  of  The  lla<,mc 
trihunal  in  regard  to  this  <|uesti()n.  that  there  is  no  dis- 
interested third  party,  hecau^e  all  the  nations  have  an 
interest  (apposed  to  that  of  the  I'nited  States.  .And 
we  must  admit  also  that,  from  the  {)oint  of  view 
of  domestic  policy,  the  jjolitical  hodies  of  the  various 
states  have  not  always  shown  themselves  more  scru- 
pulous. 


9.  In  a  protest,  addressed  to  a  committee  of  the 
State  Senate,  I-Vank  Hergen.  general  cnunsel  for  the 
Puhlic  Service  Corporation  of  \ew  Jersev,  accuses  the 
partisans  of  the  municipalization  of  the  street  railways 
of  New  York  "of  heing  delighted  with  their  (  viz.,  the 
Puhlic  Service  Corporation's)  discomfiture'  hrought 
ahout  by  laws  passed  to  obtain  just  such  a  result. 
Private  enterprises  having  developed  to  an  enormous 
proportion  the  state  property  of  Xew  Jersey,  from 
1870  to  1906,  members  of  the  State  Senate  felt  that  the 
moment  had  come  to  confiscate  them.  Tow^ard  this  end 
Senator  Hunderton  proposed  .Amendment  64  to  the 
Crimes  Act,  drawm  up  in  such  a  manner  "that  inno- 

'See  Lcs  Principes  dc  '89  et  !e  Sociulisnu.     La  Democratic 
Individualistc. 

421 


\vin;i<i;  .\n.>  win'  imiu.k    owNi'.RStiir   has  i  ail!;i) 

cencc  no  Innj^cr  cDustitutcs  a  (U'ffiiso  against  a  crimi- 
nal acclimation."  ' 

Justice  l)rc\vcr,  ol  the  Supreme  Cuurl  ui  the  I'nited 
States,  lia>  declareil ; 

"Tlic  poliie  power  lias  become  the  refii{:;<'  of  every 
serious  attack  a^ain-^t  private  property.  i'Acry  iiiiju-ti- 
tlahle  ciiar^e  from  tlic  i)oint  of  view  of  eminent  domain, 
or  from  the  ti^cal  ]ioint  of  view,  shelters  it'-elf  hehind 
the  excuse  of  police  jiower;  hut  the  p(jlice  power  cannot 
escajje  from  the  constitutional  guaranties  of  private 
property." 

Hvf^iene.  sanitatiim.  "the  conservatifMi  of  the  race," 
et..,  are  only  new  forms  <if  the  cry  of  salu::  popiili 
which  has  served  to  justify  all  the  tyrannies  of  the  ages. 

lo.  The  "niudel  emijloyer"  furnishes  some  very  bad 
exanijiles.  Those  who  s])eak  in  its  name  can  preach 
economy  to  individuals;  but  they  cannot  hold  it  up 
as  a  model,  because  it  is  wasteful  and  runs  into  debt. 
Its  ])artisans  can  jircach  economic  morality  to  indi- 
viduals: but  they  cannot  illustrate  their  texts  by  ap- 
pealing to  state  morality,  because  the  state  too  often 
"acts  like  a  dishonest  man."  not  only  in  foreign  affairs, 
but  even  in  domestic  affairs. 

^  Anitals  of  the  American  Acadcny  of  Political  and  Social 
Sc'o.cc.  May,  1908.  Legislative  Restriction  in  New  York,  page 
134- 


422 


CHAPTER  V 

CORRUPTION 

Multiplic.itinii   of  Opportunities   for  Corruption —The   ucr- 
niaii  Ra  '    ays.— .\ir.  Se(l<loii  on  Xcw  Zealand.— faussij?. 

^I)anj;ers    of    Pul)lic    I'.nterprises    in    a    Democracy. 

Rinp   I.eaiicrs.— Importance  of  Their   R61e.— The   Way 
to  Succeed. 

The  more  jxovcrnments  and  municipalities  increase 
their  functioii.s  and  int'-rlcrc  with  tlie  eceniomic  life 
of  the  group  the  more  the  opportunities  for  corruption 
will  mtiltiply. 

M.  de  Mi(|uel.  Prussian  minister  of  F" nance,  ■•ho 
was  compelled  to  hand  in  his  resignation  after  the 
failure  of  the  Imperial  Canal  projects,  declared  some 
time  afterward  : 

"If  the  separate  government  railways  hecome  the  prop- 
erty of  the  Empire,  the  Reichstag  will  claim  the  right  of 
establishing  and  revising  raihvay  rates.  The  day  on 
which  it  obtains  this  right  will  see  the  beginning  of  cor- 
ruption on  a  grand  scale  in  the  German  elections.  Al- 
ready the  temper  of  a  large  number  of  the  electors  is 
such  that  they  are  sending  to  the  Reichstag  many  repre- 
sentatives who  never  ask  how  any  given  measure  will 
serve  the  interest  of  the  nation  at  large,  but  simply  how 
it  is  going  to  be  regarded  by  their  local  constituents. 
The  concession  to  the  Reichst  ,g  of  the  right  to  fix  the 

423 


WIIEkU    AND    WUV    ITBI.IC    UWNEKSllII'    HAS    lAlLLU 

railway  rates  would  be  as  disastrous  for  our  whole  po- 
litical life  as  for  the  economic  development  of  Ger- 
many."' 

In  their  book  on  New  Zealand  Le  Rossignol  and 
Stewart  say : 

"He  (the  Right  Hon.  R.  J.  Seddon)  taught  the  people 
in  every  part  of  the  colony  to  'stand  in'  with  the  govern- 
ment if  they  wished  to  he  reniembered  in  the  distribution 
of  the  loaves  and  fishes." 

Thanks  to  this  practice.  Mr.  Seddon  himself  man- 
aged to  remain  ac  the  head  of  affairs  for  a  very  long 
time. 


Concerning  the  administrr.  n  by  the  state  or  mu- 
nicipalities of  "public  service  industries,"  F.  \V.  Taus- 
sig'  observes  that  the  title  is  applied  to  jrtain  enter- 
prises only,  as  railways,  telephones  and  telegraph, 
water,  gas  and  electricity.  In  the  very  beginning,  in 
the  I'nited  States,  competing  private  enterprises  had 
invariably  provided  these  services.  Little  by  little,  by 
virtue  of  the  law  of  increase  of  returns,  these  enter- 
prises united. 

Here  we  meet  rgaiis  the  third  incentive  of  all  human 
action.  "For  all  except  the  very  few  of  extraordinary 
gifts,  the  s]nir  of  gain  is  not  only  powerful,  it  is  indis- 
pensable." Progress  in  industry  is  largely  due  to  in- 
ventors and  administrators,  but  the  venturesome  capi- 
talist, ready  and  eager  to  risk  his  wealth  in  i  ew  ways, 

'  See  the  discu'^sion   rclntinp  to  the   Prussian    railways   in   tlie 
scries  of  volumes,  l.c  Marchc  Financier,  by  Arthur  Raffalovich. 
'  PruH't'li's  of  llcoiiniiiiis. 

424 


CORRUPTION 

is  equally  necessary.  We  owe  little  thanks  to  any  state 
that  the  world  has  heen  transformed  through  the  rail- 
ways, steam  navigation,  the  industrial  use  of  steam, 
etc.  This  transformation  has  heen  brought  about  by 
individuals.  "Hlcetric  traetinn  was  easilv  started  in 
England  as  a  public  business,  after  private  enterprise 
in  the  United  States  had  shown  how  the  thing  could 
be  done." 

'liie  transmission  and  distribution  of  hydraulic  and 
electric  power  call  for  an  amount  of  enterprise  and 
vigor  which  public  officials  are  not  at  all  likely  to 
supply.  However,  Mr.  ')\aussig  would  suggest  that 
such  resources  should  never  he  given  in  perpetuity  by 
the  public.     There  should  be  no  unlimited  franchises. 

Mr.  Taussig  speaks  as  follows  of  the  finalities  de- 
manded of  administrators  of  undertakings  in  a  democ- 
racy, and  he  is  full  of  mi.sgivings  as  to  the  corrupting 
power  of  such  undertakings: 

"It  is  often  said  that  corruption  in  our  municipal  and 
state  afTairs  is  caused  by  private  ownership  of  the  great 
monopoly  enterprises,  and  that  public  ownership  is  the 
cure.  To  reason  so  is  to  mistake  the  occasion  for  the 
cause.  The  occasion  is  the  great  fund  of  gain  which 
the  monopoly  enterprises  can  yield :  the  cause  is  political 
demoralization.  It  matters  little  whether  the  initiative 
in  corrupt  way<  is  taken  by  the  heads  of  the  monopoly 
corporations  or  by  the  public  ofificial.s— whether  the  first 
step  be  bribery  or  blackmail.  In  cither  case  it  is  the 
existence  of  venal  legislators  and  administrators  that 
brings  coarse  and  characterless  persons  into  the  manage- 
ment of  the  'public  service'  industries.  Honorable  men 
withdraw  from  the  unsavory  affairs  and  are  replaced  by 
those  less  squeamish.     The  root  of  the  difficulty  is  that 

425 


WIIHKE    AND    WliV    I'LULIC    OWNEKSII 11' 


AS    lAlLKl) 


:i  bad  political  situation  invites  corruption,  not  that  cor- 
ruption makes  the  political  situation  bad." 

The  true  way  to  abdlish  corruption  is  to  suppress 
the  opportunity  for  corruption.  I>ut  tlie  more  govern- 
ment and  nnmicipal  undertakings  increase  in  number 
and  in  importance,  the  more  these  (opportunities  will 
multiply. 

Government  undertakings  are  a  terrible  sourc  of 
temptation  to  the  ring-leaders  among  their  employees. 
They  know  that  fear  has  a  value,  and  they  become 
exploiters  of  the  fears  of  their  superiors,  the  deputies 
and  the  ministers.  And.  although  all  tlieir  plans  may 
not  succeefl,  it  is  more  than  enough  that  any  of  these 
demagogues  have  obtained  avowed  advantages.  Others 
have  obtained  secret  advantages. 

IMie  employees  of  the  navy  yards  and  of  the  city 
halls  gaze  with  admiration  at  a  man  like  M.  Goude. 
and  more  than  one  yorng  clerk  of  the  navy  department 
is  saying  to  himself : 

"That  is  the  way  to  succeed.    Let  us  imitate  him." 


425 


CHAPTER   VI 


NATIONALIZATION      OF      PUBLIC      UTILITIES      AND 
THE   FOUNDATION   OF   GREAT   I'ORrUNES 

New    Zealand. — Australia. — Great    Fortunes 

In  a  lecture,  delivered  on  Decemher  15.  19 10,  be- 
fore the  i'ahian  Society.  G.  P-ernard  Shaw  gives  the 
following  definition  of  Socialism: 

"A  state  of  society  in  which  the  income  of  the  country 
shall  be  (lividecl  equally  among  ihe  iiiiiabitants  without 
regard  to  tiiei:  character,  their  industry  or  any  other 
consideration  except  the  fact  that  they  are  human  be- 
ings." 

The  partisans  of  public  ownership  hold  that  the  real- 
ization of  such  a  conception  would  be  a  step  toward 
the  niillenmuni. 

They  cheerfully  declare  that  New  Zealand  contains 
neither  paupers  ncjr  millionaires.  Now,  among  the 
New  Zealanders  who  have  recently  died.  Jacob  Joseph 
left  a  fortune  of  £300,000  ($1,461,000)  ;  that  of  Arch- 
deacon Williams  amounted  to  £4_'o.ooo  {$_>.045,400 )  ; 
that  of  the  Hon.  \V.  \V.  Johnston  to  about  £500.000 
($-'435'000).  According  to  an  estimate,  based  on  a 
comparison  of  inheritances,  Le  Rossignol  and  Stewart 
calculate  that  one-half  of  one  per  cent,  of  all  the  fam- 

4-' 7 


WIIIlKK   and    why    I'L'BI.IC    (JW  M-K.-^l  1 1  i'    HAS    lAILED 

ilies,  each  family  being  reckoned  as  having  five  mem- 
bers, posse  es  33  per  cent,  oi  the  total  wealth  of  New 
Zealand.  And.  despite  the  growing  tax  ujxjn  land, 
and  the  division  of  great  estates,  this  inecpiality  is 
increasing.' 

In  Australia  the  wealth  is  very  une(|ually  distributed. 
In  \ew  Scnith  Wales  i  ,0(io  individuals,  representing 
0.40  per  cent,  of  the  poi)ulalion.  ])(jssess  £130.000,000 
($633,000,000).  or.  in  other  words,  an  a\erage  to  each 
individual  of  £130.000  ($633,000).  while  the  sum  of 
their  total  fortunes  amounts  to  t,^  per  cent,  of  the 
whole  private  wealth  of  the  state.  In  1904- 1905  the 
half  of  all  the  private  i)roperty  of  the  state  belonged 
to  3.000  people  at    lost.- 

Able  men  make  great  fortunes  in  these  countries  as 
other  able  men  have  made  them  in  Turkey  and  in 
Russia. 

l^tatc  Socialism  i>i  Nc'u'  Zealand,  nage  200 
"  The  Official  Year  Book  of  New  ^outh  Wales,  1904- 1905,  page 
543* 


428 


CHAPTER   VII 
disintegr.ating  character  of  public 

OPHRA'nON 


.  Individuals  Are  Industrious  and  Kconomical ;  Adminis- 
trative and  Political  Groups  Are  Wasteful  and  Kx- 
travasrant. — Public  Ownership  Means  a  Topsy-Turvv 
World. — Ghanijinc:  Human  Xature. 

Contradictions  Inherent  in  Public  Operation. — Tax-Pay- 
ers and  Consumers. — Customs  Duties  in  Switzerland. — 
Payment  in  Kind  and  the  Raising  of  Salaries. — De- 
pressing Effect  of  Public  Operation.— Pulilic  Operation 
One  Factor  in  the  Problem  of  L'nemplovment. 

Claude  .Mullins  and  ]\Iunicii)al  Operation. — The  F-dectors 
of  To-day  Are  the  Candidates  of  To-morrow. — Public 
Administrators  the  Slaves  of  the  F^mployees  Whom 
They  Ought  to  Control. — Emphasis  Not  on  Service, 
but  on  Political  Effect. 

Monarchical  Conceptions  of  the  Socialists. — Transforma- 
tion of  a  Republican  State  into  a  Beneficent  King. — 
Delusion  of  M.  Fourniere. — The  Necessity  of  the  Sub- 
ordination of  the  Individual  According  to  Philip  Snow- 
don. 

The  Budget  a  Socialist  Curb. — But  ihe  Socialists  Con- 
sider Taxation  an  Instrument  of  Confiscation. — Sidney 
Webb  on  the  Housing  of  Workmen  and  Ownership  of 
the  Sod. 

Crisis  of  Parliamentarianism. — Necessity  of  Concentrat- 
ing the  .Action  of  th"  State  upon  i'undamentals. — Se- 
curity at  Home  and  \broad. — The  Interference  of 
Government  in  the  'conomic  Activity  of  the  Nation 
Means    Disintegration   of   the    State. 

420 


1 


WIIKKI.    .\\1>    Win-    I'lHI.lC    OWNKRSIill'    11  AS    1-AII.ED 

7.  F^csistancc. —  Declarations  of  the   Swiss    F""c(lcral   Council. 

—  M.    Hrouillu't   and   Pulilic   Opinion  in   France. 

8.  Conclusions. 


I.  Fnclividuals  are  industriors,  productive  and  eco- 
nomical; administrative  and  j)()litical  .qroups,  bf)th  na- 
tional and  municipal,  arc  wasteful  and  run  the  tax- 
payers into  debt. 

The  inijcnious  casuist  turns  this  statement  about  and 
says:  "In  the  future,  municioalities  and  states  will 
f)r()(luce  and  econcinuze  while  individuals  who  have 
worked  will  re>t.  lie  who  has  produced  shall  con- 
sume: he  who  has  economized  will  no  lons^er  need  to 
take  that  trouble."  A  truly  topsy-turvy  world  that 
would   be ! 

However,  to  the  objections  to  which  such  a  con- 
ception gives  rise  the  re])ly  is  invariably:  "A  Socialist 
society  will  change  human  nature." 

If  jiast  experiments  are  mentioned,  your  Socialist 
replies :  "Those  experiments  have  been  tried  in  a  capi- 
talist society  and  consetiuently  do  not  count." 

In  general  tln^se  who  are  advocating  most  vehe- 
mently the  nationalizaticm  and  municipalization  of  all 
public  utilities  treat  the  officials  who  direct  and  govern 
them,  whoever  they  may  be.  with  the  utmost  scorn. 
If  the  Socialist  could  only  put  himself  and  his  fellows 
in  the  high  places  of  the  government  there  would  be 
nothing  left  to  wish  for. 

_>.  \'et  certain  difficulties  are  insurmountable,  even  to 
a  Socialist.  When  a  political  group  exploits  a  utility, 
if  there  is  any  profit  arising  from  the  enterprise,  it  is 
made  at  the  expense  of  the  consumer;  or,  if  there  is 


CHARACTER    OF    I'L-RLIC    OTKNATION 

any  advantage  in  it  f.^r  the  consumer,  tin;  taxpayers 
pay  the  piper. 

In  either  case  the  mintority  is  favored  at  the  expense 
of  the  niaj'  rity.  In  fact,  ev-ry  governni.  it  operation 
ends  in  contradictions,  similar  to  the  one  jK.inted  out 
by  M.  I     varger  '  apropos  of  the  .Swiss  railways: 

"Through  its  customs  duties  the  l-\>dcral  Ccnncil  raises 
the  cost  of  Hving;  then,  in  order  to  make  it  possible  for 
government  oftkirds  to  sui)port  the  heavier  burden,  it 
raises  their  salaries." 

I  have  pointed  out  the  depressing  effect  produced  on 
industry  at  large  by  any  threat  of  government  or  mu- 
nicipal operation.  Private  eftort  hnds  the  struggle  dif- 
ficult, if  not  impossible,  against  competitors  who  may 
not  only  bring  politics  to  bear,  but  who  may  even  make 
use  of  the  courts  upon  occasion.  For  no  one  is  natur- 
ally predisposed  to  invest  capital  in  an  undertaking 
from  which  he  may  be  driven  out  at  any  moment  by 
government  or  muni  'pal  competition. 

Consequently  ever  .  threat  of  socialization  or  munici- 
palization is  followed  by  loss  of  energy  in  establishing 
or  carrying  on  business,  as  well  as  by  tightness  in  the 
money  market.  Then  these,  in  their  "turn,  become  im- 
portant factors  in  the  problem  of  unemployment. 

3.  Claude  \V.  Mullins,  in  his  article  upon  "The  Mu- 
nicipal Activity  of  London,"  -  sheds  great  light  on 
the  disturbing  character  of  municipal  trading  opera- 
lions. 

'  Journal  des  £co>wnustes,  December,  1910. 

*  Revue  Economique  Internationale,  see  above. 


i 


WlIKKl-;    AM)    UIl^-    ITHl.li     ()\V  NT.KSII  1 1"    HAS    lAlLElJ 

"All  (]iR'.sti()ns  hccomc  el  -ctoral  questions,  and  this  very 
real  (Jaii<i:cr  assumes  a  more  tlinateiiiiii;  ri-pcct  when 
we  consider  the  lar.^e  number  of  employees  connected 
Willi  undertakings  like  the  tramway  service  or  water 
works.  .Municipal  cfjuncillors  are  employers  and  candi- 
dates in  one  and  the  same  person,  a  state  of  affairs  carry- 
ing with  it  a  serious  menace  to  the  future  stability  of  any 
state. 

"A  president  or  member  of  a  i.  jnicipal  committee  is 
interested  in  the  success  of  an  enterprise  both  as  a  simple 
citizen  and  as  a  representative  of  his  constituents." 

Officials  are  not  judged  according  to  services  ren- 
dered, but  according  to  the  effect  produced  by  a  "dilet- 
tante administration."  The  elector  of  one  day  may 
well  be  the  candidate  of  the  next:  and,  if  his  election 
depends  upon  employees  in  the  government  or  munici- 
pal service,  he  will  be  at  their  beck  and  call,  nor  will 
he  hesitate  before  any  sacrifice  of  principle. 

4.  The  Socialists  look  upon  themselves  as  republi- 
cans in  France,  as  in  New  Zealand.  In  reality  they  are 
monarchists,  who.  being  at  the  family  stage  of  civiliza- 
tion/ consider  themselves  as  helpless  dependents,  and 
thereffire  long  to  transform  a  republican  state  into  a 
beneficent  ruler,  whose  business  it  is  to  make  them 
hafipy.  furnish  them  with  bread,  and  otherwise  pro- 
vide them  with  all  the  things  of  which  they  stand  in 
need — their  needs  being  only  limited  bv  their  desires. 

Social  theorists,  like  Eugene  Fourniere  -  have  held, 

'  See  Yves  Guyot,  Les  Principes  de  '89  et  le  Socialisme     La 

Dcmocratie  Individualistc. 
'  Ibid. 


CIIARACri-k    Ol      I'LULIC    Ol'l  RATION 

despite  alilhe  evidence  (n  ilu-  contrarv.  that  they 
defeiKhn^^  the  n-ht>  ,,,■  the  i,uh;\  i.hiai  ' 


are 


Phihp    SrK.w.len.    M.    J'.,    representing    the    Labor 
rarty  in  (ireat  P>ritain,  is  at  any  rate  lo 
sa) s :  - 


ogical  when  he 


The  ohjcct  of  Sodah-sm  is  not  to  render  the  indi- 
vidual capable  of  Iivinj,r  o„  his  personal  resource.  That 
IS  tlie  tlicory  of  rachcal  in.hvidualism.  Its  ubjeci  is  to 
create  in  hini  a  greater  and  prcaier  sense  of  his  depend- 
ence upon  the  state,  and.  at  the  same  time,  to  inculcate  in 
hm,  the  conviction  that  he  is  a  part  of  it  and  that  he  has 
a  duty  and  responsibility  toward  the  state:  and  that 
only  ,n  so  far  as  he  fultllls  this  duty  can  he  benefit  by 
the  advantages  of  a  complete  personal  and  social  life.'' 

5-  The  budget  puts  a  curb  on  Socialism,  at  least  in 
so  far  that  it  makes  taxes  necessary;  those  who  would 
otherwise  rush  into  reckless  expenses  feel  the  burden 
of  these  .same  taxes  sufficiently  themselves  to  brin- 
home  a  vague  realization  of  the  following  truth  :  Noth- 
mg  IS  free:  e-rrythimj  must  be  pmd  for.  If  the  whole 
burden  could  only  fall  on  others  thev  wr.uld  rejoice 
m  running  into  debt.  Far  from  preaching  economv 
in  the  way  of  expenses.  Socialists  encourage  prodigal- 
ity, and  they  consider  that  f^.scal  confiscation  is  an'^'in- 
strument  of  .social  revolution. 

Sidney  Webb  says :  "The  housing  of  the  noor  will 
absorb,  through  taxation,  a  continuallv  increasing 
share  of  the  income  of  the  nation ;  and  this  increase  of 

\Llndividu   r Association  ct  L'P.tat,   Paris.   F.    Alcan 
Upon  the  Insurance  Bill,  Labour  Leader.  July   14,   19,1. 

433 


WHI'.KI-.    AM)    WIIV    IMilIK     DVVNERSMir    I     \S    lAILED 


Icjcal  taxes  is  an  uiiliccdcd  ,^i;>;n  of  tlu'  i^radiial  nation- 
alization oi  tlu-  Soil  "  ' 

\\  c  shall  ln'  alim  i  ;!l  the  "j^ncal  (la\"  ot  "the  social 
eatach  sni,"  uliiii,  alter  reiusmj^'  to  pa)  tin  ilel  Is  due 
the  government  and  inunieipal  creditors,  the  Suciali:-ts 
are  able  to  exclanii .  "At  last  v- •*  hav<-  gone  bank- 
rupt. 

6.  We  hear  frequent  remarks  concerning  the  crisis 
oi  parliamentariani>ni,  ot  the  int  'leiencv  antl  'ack  of 
power  of  our  representatives.  \-  a  matter  of  fact, 
our  representatives  arr  guilty  of  wishing  to  do  that 
which  they  know  perfect!  well  w  one  of  them  can  do, 
whatever  he  his  elticiency  o:    his  capacity   for  work. 

Now,  parliamentary  government  is  possible  only  on 
condition  that  it  be  divorced  from  all  secondary  cpies- 
tions.  and  all  (juestion-  which  do  not  concern  domestic 
or  foreign  security  are  subsidiary  and  more  or  less 
negligible,  in  so  far,  at  least,  as  direct  governnn'nt  in- 
terest is  concerned.  Parliamentary  government  will 
be  strong  in  proportion  as  its  activities  are  confined 
to  the  fundamental  duties  of  a  state. 

Statesmen  who  pursue  an  opposite  policy  are  paving 
the  way  for  anarchy.  Thcv  are  surrendering  the  insti- 
tutions and  the  general  policy  of  the  country  to  the 
will  of  those  who  see  only  their  own  interest.  They 
become  the  proteges  of  the  employees  whom  they  ought, 
to  control.  They  defer  all  (|ue>tions  t(j  the  convenience 
of  the  ringleaders  of  associations  of  their  employees. 

In  the  measure  that  they  are  willing  to  burden  them- 
selves with   functions  projierly  belonging  to  individ- 

*  Socialism  in  England,  page  109. 

434 


"•'1-  lluy  arc  sacriflcit,,.  11,.-  ^.,ncr.,l  inUTcst  a,„|  ,„. 

.-..U-  ,„  .,„|,l„jccs  who  cunsi.kr  th.  ,n.,lv.s  as  the  r'"^ 

prupr,..,„r.s  ,„  scTvicc.  uhij,  they  a,.  ,,a„i  ,„  ,      ,    „' 

/..■  u,>.rfrr.;,.r  of  //„■  »,„,.  ,„  „„  „ ,„    ,„.,,^.  ,"^ 

j/a/.'.  «^/''"ci/f  dismtccjratwn  of  the 

he  Chaml,crs.  propo.,ng  the  creation  c,f  an  adininistra 
t.ve  tribunal,  contains  the  following  passage 
"In  the  degree  that  a  modern  state  extends  the  circle 

vate  enterprise,  the  nun,ber  of  its  employee     n    else    to 

Sn^^tis^^ni^r?:;:;-^    -    -^^-    protec;;^ 

M.  Brouilhet   French  socialist  reformer  and  partisan 
of  government  intervention,  says: 

eni'ToT  '""'"""^"'  ^''^'"  P"'^''^  °P'">°"  -^^  '"o^t  leni- 
ent to  the  government;  but  since  the  government    de 
sinng   to   conciliate   the  people,    has    be'ome  an    active" 
and  3       '"^'■-''"^.^"'-Pn-ses.  a  reaction  ha.  se    in 
and  truly  pubhc  opmion  is  now  lacking  in  indulgence"' 
As  for  France.  M.  Broudhet  .-oncludes: 

"Before  the  government  absorbs  another  tenth  of  the 
general  activity  of  the  country  a  long  time  w.ll  certLnly 

'Gaaette  de  Lausanne,  Febnnry  i,  1912. 

435 


WlILKi;    AM)    Win     I'LUl.U     (i\\  NI.IOIlll'    HAS    lAll.Kl) 

It!  ;i  rtiiKirkablc  ariicio,  appcariii)^'  in  ihc  fiaccttc  dr 
I  ancaunc.  I'.iiouard  Si-rrftati.  inciiilx-T  of  the  National 
C'dUiuil,  declares : 

"Ahout  .^n  year'^  af»o  tlic  Federal  power  was  first  and 
for'inost  i>oliti(.al.  Its  ])riiuipal  Imsiiiess  was  the  na- 
tional defense,  and  the  lelatiuii^  l)etween  Switzerland 
and  foreif^n  countries. 

"In  domestic  affairs  its  action  in  rei,'ard  to  the  cantons 
was  advisory  and  di^-interesteil  in  charaeler,  its  interven- 
tion a-.  limited  as  possilde.  It  ij;nverned  from  ahove  and 
devotid  itself  mainly  to  e-tahlishin.t,'  national  iniity. 
I'nder  this  rej^dme  we  hecame  a  nation  under  a  ?*"ederal 
government  chietly  interested  in  seeini^  the  rigjht  prevail. 

•'['nt  things  have  changed.  The  Federal  government 
lias  chosen  to  hetome  !)anker.  common  carrier,  insur- 
ance broker,  and  it  is  only  a  (luestion  of  time  before  it 
will  become  a  merchant.  U  i  only  half  a  banker,  but 
it  has  become  a  real  common  carrier  and  this  operation 
has  made  it  a  debtor  for  1.500.000  francs,  owed  almost 
exclusively  to  foreign  creditors. 

"To  the  enormous  enter])rise  of  transportation  has 
nov;  been  added  insuranc<'.  Here,  again,  we  must  count 
by  millions. 

"To-day  our  whole  political  lile  is  dominated  by  finan- 
cial preoccupations,  .uul  technical  experts  have  taken  the 
]ila'-e  of  sta'esmtn. 

"They  impose  theni'^elves  on  the  Federal  Council  on 
the  basis  of  responsibilities  they  have  themselves  in- 
curred, and  the  Federal  Council  transmits  to  the  Cham- 
ber the  will  of  this  or  that  general  manager  of  some  pub- 
lic undertaking.  In  fact  managerial  authority  has  a 
tendency  to  become  dictatorial  authority. 

"The  German  part  of  Switzerland,  Bern,  Zurich, 
Aaron,  etc.,  is  the  storm  center  of  all  this  propaganda. 

43^ 


CHARAnER    Cr    ITIU.IC    OPKI'ATIOV 

RoniarcL'  Switz'jr'.and  still  resists.  It  lias  twice  rt-jected 
the  state  bank,  twii-j  the  insiiranoc  monopoly,  ant)  cn':e, 
at  least,  the  purchase  of  railroads." 

8.  The  experiences  arisini:  from  5,;jif  ar.  i  niumcipal 
tradinf^  operations  lead  mcvitahly  t  i  the  following  con- 

c)usi(;ns : 

1.  r-uhlic  niono;.io]ies  kill  the  spirit  of  initiative  by 
de.stroying  (.<inipetiti(^n.  The  ultimate  re.-ult  is  fatal 
industrial  lethargy. 

2.  Public  operation  emphasizes  the  special  deinands 
of  the  con:munity,  ratl.tr  than  fuiidanienial  necessities, 
and  provid.cs  opportunities  for  nepotism,  graft,  and 
corruplicm. 

3.  Operation  by  states  and  local  governments  is 
niiire  difticult  than  private  management.  This  is  a 
rule  which  holds  good,  des  ):te  a  few  apparent  excep- 
tions. 

4.  Government  employees,  paid  fo-  their  loyalty  to 
the  pul.'lic  interest,  come  to  consi.ier  their  fxisitions 
as  their  own  private  property,  and.  tlK-  more  nuirierous 
they  are.  the  more  they  incline  toward  ercchanging  their 
role  of  subordinates  for  thr.t  of  masters;  from  being 
directed  they  become  the  directors. 

5.  Intervention  of  the  public  power  has  an  adverse 
influence  upon  the  distribution  of  wealth;  sometimes 
it  is  the  whole  body  of  taxpayers  who  must  suffer  for 
the  sake  of  some  privileged  class,  sometimes  the  con- 
sumer is  defrauded  to  beneM^  the  tavpaver. 

6.  In  every  public  enterprise  the  risks  of  loss  are 
borne  by  the  taxpayers,  and.  in  order  to  realize  their 
immediate  ideals,  and,  while  wa'ting  for  the  hoped-for 

-137 


WHERE   AND    WHY    I'LBMC    OWNERSHIP    HAS    FAILED 

increase  of  personal  influence,  statesmen  or  municipal 
officials  tie  up  the  finances  for  a  more  or  less  long 
period,  meanwhile  burdening  the  taxpayers  of  the  fu- 
ture with  expenses  for  which  they  will  have  to  provide 
without  having  consented  to  them. 

7.  All  such  trading  operations  oppose  political  to 
economic  competition. 

The  propaganda  of  public  ownership  has  established 
mere  firmly  than  before  the  truth  of  the  following  in- 
dustrial laws : 

First:  Neither  states  nor  municipalities  should  at- 
tempt tasks  especially  adapted  to  individual  effort. 

Second:  In  the  case  of  those  utilities  in  zvhich  the 
public  interest  is  general,  as  railways,  water,  gas,  elec- 
tricity, tramways,  etc.,  there  must  be  a  physically  ana 
morally  responsible  body,  accountable  to  the  public  on 
the  one  hand  and  the  service  on  the  other,  and  pro- 
tected by  contracts  against  vacillations  of  public  opin- 
ion n.nd  the  extortionate  demands  of  interested  groups, 
whether  employees,  consumers,  or  politicians. 

Third:  For  individuals  the  watchword  should  be  ac- 
tion; for  local  and  state  governments,  control. 


438 


APPENDIX  "A" 


ALCOHOLISM  L\  RUSSIA 


The  best  minds  in  Russia  stand  aghast  at  the  rav- 
ages wrouglit  in  Russian  soeictx-  by  the  abuse  of  vodka, 
t'  0  national  spirituous  drink  of  the  lower  orders.  The 
Cjo\ernnicnt  at  St.  Petersburg  has  maintained  a  mon- 
opoly in  the  manufaeuire  and  sale  of  this  commodity, 
and  has  promoted  with  great  energy  its  production 
and  use.  The  Army  antl  Xavy  that  fought  with  Ja- 
pan were  su])])orted  by  the  revenue  that  came  from 
this  monopoly,  and  Russia,  we  are  told,  has  replenished 
the  privy  purse  of  its  so\ereign  from  the  sale  of  a 
drink  that  is  actually  tending  to  the  demoralization  of 
the  common  people.  .\s  far  as  we  can  learn  from  the 
opinion  of  the  Russian  press,  ever  since  the  Russian 
Government  declared  zuxlka  a  state  monopoly,  and  as- 
sumed the  role  of  the  saloon  keeper,  the  licjuor  business 
there  has  been  making  ra])id  progress,  and  ha=  become 
one  of  the  main  sources  of  income  of  that  country. 
Last  year  the  (Government  of  the  Czar  realized  from 
the  sale  of  liquor  $412,000,000,  and  for  the  first  six 
months  of  this  year  the  proceeds  exceded  those  for  the 
corresponding  period  of  last  year  by  nearly  $23,500,- 
000,  which  figures,  perhaps,  tend  to  show  that  the  Rus- 
sian bureaucracy  has  been  successful  in  one  branch  of 

439 


WHERE    AND    \VII\     I'L  lil.li     (»\\M-l<>tlH'    HAS    FAILED 


endeavour,  at  any  rate.  It  niay  be  recalled  here  that 
Mr.  Maklakov,  the  Minister  of  the  'ntorior.  said  in  an 
interview  with  a  l*'rench  ji»uniali'l  ^(  nie  tinu  :v^'>  that 
the  "^evere  cHniatv  of  I\u>>ia  makes  alcohol  a  vital 
necessity  to  the  masses."  I'lit  >inuv  Kussi-'uiN  do  not 
agree  with  that  statesman's  \ie\\.  and  !ia\e  very  dif- 
ferent ideas  about  the  resuU>  of  ilic  »  aivcrnmrnt's  ac- 
tivity in  that  direction.  "I'ublic  drunkennes-'  !,-,3  been 
growing  to  e.xtraorrlinary  proportions,"  savs  the 
Ryctch  (St.  Peter sbu r,t; ),  and  tlie  increase  in  drinking 
"has  assumed  a  really  threatening  character."  The 
radical  press,  ami  c\cn  some  con>er\ative  (organs,  have 
been  conducting  a  \igorous  cam])aign  against  the 
liquor  monopoly.  Mr.  M.  Menshikov,  of  the  Xovoxc 
I'rcmya  (St.  Petersburg),  condemns  it  in  the  follow- 
ing wcjrds : 

"A  state  monopoly  of  the  source  of  drunkenness  ex- 
ists only  here,  in  Russia,  ;  iid  all  the  rest  of  the  world 
— it  seems,  without  exception — docs  not  allow  the 
complicity  of  the  (iovernment  in  this  public  vice.  In 
the  whwie  world,  even  in  the  barl/iric  and  pagan,  the 
role  (jf  the  C'iovernment  is  ])resumed  to  be  a  struggle 
against  vices,  but  not  parti'Hpation  in  the  way  of  their 
exploitation.     .      .  Our  official  i)ublicists  (oh.  how 

hard  their  task  is!)  maintain  that  the  (Kjvernment  sells 
alcohol  exclusively  willi  a  view  to  limiting  the  evil : 
that  if  it  should  allow  perf'^rt  freedom  in  the  manufac- 
ture and  sale  of  this  poison,  drun'^-enness  would  reach 
'quite  incredible  limit.s.'  However,  the  experience  of 
all  nations — both  Chiistian  and  pagan — which  giant 
freedom  in  this  respect  shows  different  results,  l-'ub- 
lic  intemperance  in  those  con;  iries  persists,  bui   ;    .  far 

440 


AJTENUIX 


less  and  tr^it  so  appalling  as  here.  Why?  For  one 
sim])k'  reason.  Repudiatinj^  the  monopoly  of  liquor. 
the  goveriinieiUs  in  the  West  deprive  this  vice  of  the 
most  powerful  cajjital  in  the  world,  that  of  the  state. 
I  hey  dci)rive  it  of  the  most  powerful  mechanK-^m  of 
(iistril)uiion.  the  i^ovcrnmental  system.  They  take 
from  it  the  h.if^he>t  authority,  that  of  state  approval. 
That  alone  constitutes  a  hard  hlow  to  vice. 
Some  may  say  :  I'erniitting  the  manufacture,  sale,  and 
C(5nsumption  of  alcohol,  the  governments  in  the  West 
grant  freedom  to  thi>  evil.  Not  at  ^.11.  Only  an  oppor- 
tunity for  evil  is  afforded,  hut  simultaneously  measures 
are  taken  to  limit  tlie  opportunity.  Not  getting  into 
an  irreconcilable  contradiction  with  itself,  like  our 
(iovernment,  the  western  autJKirities  can  hght  drunken- 
ness like  any  other  vice.  Ihit  here  the  temperance 
inovement.  a>  is  known,  frequently  meets  with  opposi- 
tion .in  the  pan  mI  the  Government.  The  resolutions 
of  numerous  village  assemblies  regarding  the  closing 
up  of  saloons  and  Government  li([uor  stores  have  not 
been  aftirmeu.  petitions  have  not  been  granted,  preach- 
ers of  temperance  have  frequently  been  dealt  with  as 
common  rioters,  and  .subjected  to  punishment.  .     . 

Despite  the  categorical  'wish  of  the  Imperial  Duma 
that  li(|uor  should  not  be  sold  in  the  colonization  lands 
(^f  Siberia  belonging  to  the  (lovernment  and  the  Minis- 
try of  Domains.  li(|uor  is  being  freely  sold  there. 
For  manv  years  the  press  and  society  have 
pointed  to  the  unseemlmess  of  selling  liquor  on  great 
Christian  holidays  or  in  the  early  hours  when  the 
working  people  go  to  their  factories  and  mills,  or  of 
selling  it  in  such  small  quantities  that  the  last  cent 

441 


WIIER!.    AND    WIIV    icliLIC    OUNKKMIIl'    HAS    FAILED 


might  })e  taken  from  the  beggar.  The  imh-ceHcy  and 
the  gr^at  harm  of  it  are  well  understcjoil,  but  what  can 
yon  (i.)  if  the  nature  (j1  trade  ui  general  and  that  in 
liquor  in  particular  demand  that  the  tiade  shouid 
adapt  itself  to  the  chief  consumer- -the  'nuking 
masses.''  Having  become  the  owner  ol  ,uk1  uealer  ni 
such  a  poisonous  produd.  the  (government  has  pla  .-d 
itself  in  a  false  positifin  from  wh'-h  there  is  no  way 
out.     To  limit   the  traffic  men    s  h,  limit   the   ii  rome 

•     .      .    ;  not  to  limit  it  mean^  really  to  mar.edi  mkards 
of  the  people." 

In  conclusion.  Mr.  AIeii:,hikov  taKes  i  lis  more  hope- 
ful view.  Imwcver : 

"No  matter  how  much  bureaucratic  eloquence  the 
'l!(|uor  publicists'  should  expend,  the  fate  of  the  liquor 
monopoly  in  Russia  is  aneady  decided.  If  not  the 
days,  the  years,  of  this  unhappy  child  of  Count  Witte 
and  Kokovtzov  are  numbered.  I  say  this  with  abso- 
lute certaint-. .  because  I  cannot  conceive  that  the  cl  md- 
uig  ot  the  r,(ivernrnent's  consciousness  in  this  question 
can  last  much  longer.  Seeing  the  terrible  results  of 
public  intemperance,  it  is  quite  improl)able  that  the 
Duma  and  the  Imperial  Council  will  n  t  attempt  to 
check  the  danger,  that  the  church  will  not  take  a  hand, 
enlightened  society,  and  lastly  the  Government  itself." 
— Translations  made  for  The  Literary  Digest. 


M2 


APPENDIX    'B" 

THE  FINAXXIAL  YEAR  IN   AUSTRALIA 

Effects  of  Labour  Rule. 

(from  our  correspondent) 

Sydney,  Oct.  21. 
Three  and   a  half  months  have  elapsed  since  the 
close  01  the  past  financial  year,  and  it  vs  oalv  now  that 
It  can  det.nitely  he  .said  how  the  figures  for  the  vear 
were  shaped,     fuen  n(.w  the  Xeu-  South  Wales  Bud-et 
for  the  ( -Trent  year  has  not  been  forthcoming,  which 
IS  a  serious  inconvenience,  because  Xew  South  W'-iIes 
has  built  up  a  heavy  deficit,  and  the  position  nJeds 
righting.     But  it  would  be  a  blow  to  the  Labour  Partv 
now  in  offi--e  to  impose  fresh  taxation  prior  to  the 
State  elections  just  ahead,  and  so  the  question  has  been 
.she  ved.      1  he  Commonwealth   Budget  was  delivered 
early  in  October,  and  fixe  states  have  put  fonvard  their 
estimates — two  within  the  past  week. 

State  revenues  expanded  at  a  slower  rate  last  year 
as  can  be  gathered  from  the  following  statement  while 
expenditures  increased  without  check  in  two  of  the 
states  : 

443 


.^^, 


WHKRt;    AM)    UIIV    FTHLIC   OWXERSHIP    UAi 


S    FAILED 


SIX  srvr:;  kevknuks  comhined 


1910-11.. 
191 1-12. . 
1912-13. . 

Estimates  (say 
1913-14   ■ 


lixpenrii- 
turis. 


K.v.T.ucs.  tuns.  Excess  of 

•C.^7.of',SA53   i'37.49'^3i5  Hxpinditun',      i;nj6h2 

4'.-7«.034     4'.'4«,<>4f>  R.  v.nuc,  i"';m,s8 

4.>.'>5f>..W«     44  240,,V)5  Expniditurc,     M^4,'407 


40,o5(),()<x)     4(,,boo,(XKj    Expenditure, 


550,000 


The  eMunates    tor    1913-14  arc   composed   of   five 
Hud^rct   siatcnicnts.  and.   in  the  case  of   New   South 
Wales,  allow  for  an  increase  of  £400.000  in  taxation 
which    the    I'rcnner    foreshadowed,    and    an   average 
growth  m  other  revenues.     Xow.  it  will  he  noticed  that 
in   1911-12  the  conihined  revenues  increased  £^913- 
000.  but  in  i.;ij-,_;!  the  increase  was  onlv  £1,778000 
or  not  one-halt  that  of  the  previous  vear.     Hut  the  ex- 
penditures,   which    increased    £.5,649.000    in    191  i-i' 
further   increased   £;„o«).?,ofx>   m    1912-15— hence   the 
combined  deficiencv. 

With  regard  to  the  estimates  for  1915-14.  it  will  be 
seen  that  an  increase  ..f  dose  upon  £5.000.000  is  al- 
owed  tor,  including  further  taxation  in  New  South 
Whales  and  West  Australia.  Whethe.  it  will  be  realized 
IS  the  unsolved  problem.  Revenues  have  lost  much  of 
their  elasticity  just  now. 


CROWTH    OF    I.ABOl'R    EXPENDITURE 

But  these  combined  results  tar  all  the  States  with 
the  same  brush,  and  that  is  altogether  unfair.  Four 
of  the  states  are  not  under  labour  administration  while 
two  (New  South  Wales  and  West  Australia)  are  so 
S'^parating  th.^  returns  for  last  year  into  the  two 
groups,  wc  have  the  following: 

444 


APPKNDIX       B 

Kxpendi- 
Rcvenur  turc. 

I  WO  Labour  Govern- 
ments £20>:57.ii.s    L'jj,275,Ho8    Deficit.  £1,418,783 
I' our  other  Govern- 

ments         ..  ..       22  J^)^).^^},      ->i,'/.4,f>o7    Surplus,       234,,^^ 

•';43."5'>.39«   £44,240,«05     Deficit,  £1,184,477 

The  two  labour-governed  states  secured  £1,11^.000 
of  the  year's  revenue  expansion,  while  the  rcmainin,:^ 
four  gained  only  £664.000  :  hut  the  latter  gr./up  all  li-  (  d 
withui  their  incomes,  while  the  two  labour  administra- 
tions lived  much  beyond  thein.  Similar  results  were 
shown  in  the  [)rece(hng  year,  only  of  a  less  pronounced 
character,  and  they  are  aj^ain  apparent  in  the  new 
financial  year's  estimates,  and  both  these  labour  adnnn- 
istrations  have  already  imposed  more  taxation,  and 
their  programs  include  yet  additional  taxation  in 
1913-14- 

Labour  has  been  three  years  in  office  in  New  South 
Wales,  and  two  years  in  \\'cst  Australia.  But  a  three 
years'  comparison  of  the  two  groups  i.-,  altogether  re- 
markable : 

AUSTRALIAN    STATE   EXPENDITCT.ES. 


1009-10 
I912-13 

'I'liree  years'  increase 


Two     Labour 
Govei-nments. 

£16685,882 
22,275,898 
Jt;5,59t>.oi6 
<-"r  33.5  per  cent. 


Four     Other 
Govenixnents. 

£18,887,37^ 
21,964  907 

•''3,077,535 
or  16.3  per  cent. 


The  whole  reason  for  the  marked  reirogression  un- 
der labour  finance  has  been  in  the  striking  growth  of 
their  expenditure,  which  relatively  in  the  past  three 
years  has  been  twice  as  rapid  under  labour  administra- 
tion as  under  what  .Australians  term  Liberal  adninis- 

44  .S 


WirKRK    A.M.    WHY    VVIUAC   OW.VFRSIIII'    HAS    FAILED 

tration.  It  !>  <|uite  to  be  umlerstrxKl.  Labour  came  inte 
oftice  (.n  the  votes  of  a  class,  and  tbat  class  is  master 
It  cannot  be  denied  wiiat  it  asks  for.  and  in  fact  the 
legislative  procrranis  have  u,  be  submitted  to  the  caucus 
at  the  Irades  llall^  and  approved  before  tliey  can  be 
l)Ut  forward. 

When  the^e  a.huinistraticnis  came  into  office— and 
the  caucus  into  power— it  was  boasted  that  the  burden 
of  their  schemes  should  be  placed  upon  the  shoulders 
al)le  to  bear  it.  I5ut  their  expenditures  have  run  away 
trom  their  incomes  all  the  same,  and  tlie  burden  has 
been  spread,  a.s  the  increased  cost  of  livintj  specially 
affects  labour. 

What  IS  more,  in  the  rfTorts  to  find  monev  for  state 
employees,  which  have  multiplied  j^^reatlv.  loans  have 
been  called  ui)on  to  supplement  revenue  freely.     The 
railwavs  and  .,ther  public  works  are  needed,  but  the  ef- 
fect .U'  the  increased  loan  expenditure  on  the  volume  of 
state  employment  has  been  marked  all  the  .same.    How- 
ever, the  effect  upon  revvinie  has  been  bcvond  contro- 
versy.    ?Iappily.  all  six  of  the  state  governments  are 
not  under  labnur  rule,  and  the  commonwealth  has  re- 
cently made  a  chau-e.   The  state  election  in  New  South 
Wales,  just  ahead,  may  d-,  so  likewise.      But   in  the 
toregoing  statements  facts  (,nly  have  been  dealt  with 
and  facts  are  above  the  party  cries  current  in  .Australia' 
\\  1th  respect  to  the  rc\  cnue  estimates  for  the  cur 
rent  year,  over  £j.ooo,ooo  .,f  the  expected  increases  go 
to  the  two  labour  administrations  and  £1,000.000  to  the 
remaining   four  states;  but.   then,   the  labor  govern- 
ments are  augmenting  taxation,  and  may  not  realize 
their  estimates.     However,  that  remains  to  be  proved. 

446 


APPENDIX 


THK  COMMONWEALTH  AND  THE  STATES 

Labour  has  also  been  three  years  in  office  in  the  Com- 
n  onwealth,  and  the  expenduurc  has  been  more  than 
doubled— growing    from    £7,4i)ij,^iy    in    1909-10    to 
i'i5.779.4H3  i"  1912-13.     Much  of  the  increase  is  for 
vakie  received,  including  the  fleet  nucleus.     But  every 
department  has  grown  enormously,  like  the  post-oftice, 
which  cost  £3.231.198  in   1909-10  and  £4,783.744  in 
1912-13 — an  increase  of  48  per  cent.,  excluding  con- 
struction.    The  expenditure  of  Australia    (common- 
wealth and  states),  excluding  all  duplications,  was  last 
year  £59.780.088.  and  the  combmed  revenues  £58,492.- 
834,  the  net  deficiency  having  been  £1,287.254.     The 
commonwealth  accounts  showed  a  surplus  of  £391.550, 
but  that  was  because  £4()4,397  of  the  expenditure  was 
charged   to  the  accumulations    from  previous   years. 
That  was  legitimate,  but  the  actual  expenditure  of  the 
year  is  given  in  the  above  statement.     The  common- 
wealth  expenditure   in   the   current  financial   year   is 
placed   at    £15.147.000.   but   that    is   after   deducting 
£2.653.223  charged  against  the  accumulations  of  previ 
ous  years,  wiping  them  out  completely. 

Australia  has  tried  the  effect  of  labour  rule,  and  has 
paid  the  bill,  apart  from  the  deficits.  This  serves  to 
show  what  the  cost  has  been,  and  that  cost  may  have 
some  effect  on  the  elections.  That  it  has  been  a  bur- 
densome luxury  is  clear,  while  whether  class  legislation 
is  the  best  of  legislation  is  a  matter  which  may  be  left 
to  consideration.  Class  legislation  never  gives  the  re- 
sults anticipated.— The  Times  (London),  November 
29.  1913- 

447 


APPENDIX    "C" 

THE    SHORTCOMINCiS    OF    THE    TELEPHONE    IN 

ENGLAND 


To  inyonc  who  has  had  practical  experience  of  the 

I  nited  States  telephone  service,  resulting  tnini  private 
enterprise,  the  inferinr  condition  of  the  I'.ns^lish  service 
excites  no  wonder.  The  history  of  the  tel('i)hone  in 
the  I'nited  Kin^alom  durinL,^  the  past  y)  years  has  been 
:i  lamentable  tale  of  luire;iiuratic  Idnnderini;.  tolerated 
by  a  conmuuiity  which  has  failed  to  i)erceive  the  poten- 
tial valne  oi  this  method  of  comnnnncation  and  to  in- 
sist npon  its  effective  orc^anization  cm  a  bnsiness  basis. 
As  the  resnlt  of  a  short-sighted  riovernment  policy,  of 
official  mismanatrement,  and  the  parochial  attitude  of 
local  authorities,  the  number  of  telephones  i)er  hundred 
of  the  population  in  f'.reat  Britain  to-day  is  1.4.  as 
against  8.1  in  the  I'nited  States.  London,  the  greatest 
city  in  the  world,  boasts  J. 8  telei)hones  for  every  hun- 
dred of  its  inhabitants,  as  against  a  percentage  of  24.0 
in  !  .OS  Angeles. 

One  of  the  chief  obstacles  barring  the  way  to  satis- 
factory development  of  the  telephone  as  a  public  utility 
has  been  the  traditional  conservatism  of  the  Post  Office 
and  the  fixed  idea  of  proteciing  the  (iovernment's  tele- 
graph  revenues  against   effective   competition   by   the 

448 


Al'PEM'IX       (■ 


telephone,  in  iSSy  the  I'.i^tiua^ter-Ceneral  (after  de- 
chnniK  1-'  inirdui.c  the  te!ei)hune  patent-^)  hn-it^ht  a 
suit  U>  prevent  the  l^th^on  Inuipany  In.ni  e-.tahhshinK 
telephone  exehanRes  in  L.>n,l,.n.  as  constituting  an  ni- 
friuKcMnent  oi  hi>  teleKrapii  nionop<.ly.  Suecesstul  ad 
niinistratu.n  ..f  an  industrial  enterprise  hke  the  tele- 
phone reiiuires  vigilant  initiative  aiul  elasticity. 

I'RIVATK    KNTF.RPRISK    IN     AMFKICA 

In   America  the  possihilities  of   the  telephone  as  a 
time-having    and    lal.nr-saving    invention    were    hetter 
realized   from  the  outset       Thanlo  to  the  imelligence. 
foresight,  and  public  spirit  of  Mr.  Theodore  N.    .'-.l 
founder   of    the    telephone    enterprise    in    the    I  nited 
States  and  still  i-resident  ..f  the   .\inerican    1  elephoue 
and  Telegraph  C  onipanv.  the  l)usines>  has  been  .^eadilv 
built  up  with  high   i.leals  of  organized  elliciency  and 
civic  dutv.      Mr.   Vail's  ambition   was.  and   is.   '  that 
every  pers.-n.  firm,  or  company  in  the  Imted  States 
that  ought  to  have  a  telephone  shall  be  provided  with 
one.  and  that  anv  person  so  provide.l,  wherever  he  may 
be  located,  can  within  a  reasonable  time  be  connected 
to  the  teleiihone  of  any  <.ther  subscriber  and  talk  satis- 
factorily "     I'or  ^o  vears  work  has  been  steadily  car- 
ried on  with  this  ideal  in  view,  and  with  marvellous 
results      \t  the  International  Telephone  and  1  elegraph 
Conference  held  in  Paris  in  September,  i()io.  the  chief 
engineer  of  the  company  summarized  some  of  these 
results  as  follows: 

In   the   plans    whicli    wc   have    ma-l-^    f..r    Nrw    Vnrk   and    for 
the   ..tluT   cities   in   America   it   has   heen    t„nnd.   all   things   cun- 

449 


MICROCOPY    RESOLUTION    TEST    CHART 

(ANSI  ond  ISO  TEST  CHART  No    2i 


1.0 


I.I 


1.25 


128 
3.2 


ii,  3  6 


1.4 


III  2.5 
11  2.2 

12.0 
1.8 

1.6 


_^  /APPLIED   IfVMGE     Inc 

=r-.  ■    ■    .    '    '.',-.    street 

=-.=  ■■  „,r.t.b!er,    l,e«    York  1«609         USA 

'-=^  '16)    482  -  0300  -  Phone 

=^  '!6)    288  -  5989  -  fa« 


VVPRRK    AND    \V!IY    IMJRLIC    OWNERSHIP    HAS    f-AILEU 

sidercfi,  rridst  economical  when  building  new  subways  to  plan 
for  a  period   soniewiiere  between    15  and  jo  years   ahead. 

Our  expenditure  for  new  e(jnstruction  (Itiriny  the  first  six 
months  of    iQio  is  more  than  ^_m,(x:>o,ooo 

The  fundamental  plans  for  Xtw  \'ork,  not  including  the 
vast  sul)url)an  regimi  >ut^i(le  of  the  municipal  limits  of  (jreater 
New  York,  provided  in  kjoo  for  a  system  of  51,39^  telephone 
stations,  served  from  52  central  offices,  with  an  estimated  popu- 
lation of  4,Soo.ooo.  In  ig,?o  the  plans  provide  for  j, I4_',(X»  sta- 
tions, to  be  served  from  109  central  offices,  with  an  estimated 
population  of  <S,(Soo,ooo. 

At  the  present  time  an  enormous  amount  of  toll  line  business 
takes  place  between  New  York  City  and  the  territory  tributary 
to  it  for  ,^0  miles  artiund.  In  yo  per  cent,  of  this  business  the 
connexiun  is  made  in  an  average  of  ,^S  seconds.  In  all  of  these 
cases  the  transmission  cijnditions  are  S(.  planned  that  the  sub- 
scriber may  converse  with  ease.  A  local  call  is  accomplished 
in  less  time,  reipnring  only  22  siTonds  where  but  one  office  is 
involved,  and   slightly  more  between   two  offices. 

Between  cities  as  far  distant  from  each  other  as 
New  York,  Boston,  Washington,  and  Philadelphia, 
"Good  talking  with  prompt  connexions"  hy  under- 
ground cahles  is  the  regular  rule,  while  communication 
by  phant(jm  loaded  overhead  circuits  has  been  extended 
as  far  west  as  Denver,  distant  J. 200  miles  from  Xew 
York. 

RESULTS    OF    EFFICIENT    SERVICE 

There  is  no  doubt  that  the  superiority  of  the  Amer- 
ican system  has  been  attained  in  a  great  measure  by 
administrative  ability  in  its  organizers  and  the  wide 
field  of  opportunity,  with  few  serious  obstacles  of  com- 
petition, in  which  they  have  worked.  Their  outlook 
has  been  steadily  national,  not  parochial.  They  have 
realized  that  defective  tele|)hone  communication  is,  in 
every  sense,  bad  business,  and  that  the  factors  consti- 
tuting goful  service,  in  the  order  of  their  importance, 
are   ( i  )   speed  and  accuracy  in  securing  connexions ; 

450 


APPENDIX    "C" 


(2)  volume  and  clearness  of  sound  transmitted,  and 

(3)  cost.  They  have  realized  that  the  money  value  of 
the  time  and  temper  wasted  by  the  public  over  a  bad 
service  is  a  far  more  serious  consideration  than  any 
reasonable  charges  imposed  for  a  good  one,  and  they 
have  therefore  proceeded  on  the  principle  that  speed 
and  reliability  are  more  important  than  cheapness. 
Furthermore,  Mr.  Vail's  civic  ideals  have  been  applied, 
with  loyalty  and  enthusiasm,  throughout.  Esprit  de 
corps,  and  a  spirit  of  emulation  between  exchanges  are 
encouraged  to  the  utmost.  One  of  the  best  features  of 
the  telephone  business,  as  organized  in  America,  is  the 
public  appreciation  of  the  staff's  keenness,  its  "team 
work,"  and  pride  in  efficiency. 

Under  such  conditions  the  public  service  retains  its 
human  interest — no  small  factor  in  smooth  working — 
and  the  "telephone  habit"  becomes  easily  explicable. 
In  January,  191 1,  the  number  of  telephones  in  New 
York  was  equal  to  the  combined  totals  of  London, 
Paris,  and  Berlin. 

FAILURE   OF    GOVERXMENT    CONTROL 

In  Great  Britain  the  history  of  telephone  legislation 
has  persistently  reflected  the  vacillations  of  immature 
opinion,  strengthened  by  the  attitude  of  permanent  offi- 
cials of  the  Post  Office  and  the  Treasury.  The  situation 
to-day  is  the  result  of  years  of  laisser-faire,  improvi- 
dence, and  vacillation.  Its  economic  defects  and  inad- 
equate equipment  are  the  natural  consequences  resul- 
tant from  the  National  Telephone  Company's  inability, 
as  the  expiry  of  its  franchise  drew  near,  to  provide  for 
expansion    of    service    and    renewal    of    plant.      The 

45 1 


WHERE   AXI)   WHY   PUBLIC   OWNERSHIP    HAS    FAILED 

economical  construction  of  new  underground  cables 
alone  involves  plans  and  estimates  for  a  period  some- 
where between  15  and  20  years  ahead.  Further  causes 
of  disoro^anization  lie  in  the  relaxation  of  discipline 
and  esprit  de  corps  consequent  upon  the  transfer  of  the 
telejihone  company's  personnel  to  the  Post  Office;  in 
the  jealousies  and  friction  between  old  employees 'and 
new.  all  tending  to  impair  smooth  working;  above  all, 
m  the  technical  telephone  staff's  recognition  of  the  fact 
that  imder  the  cast-iron,  water-tight  compartment  sys- 
tem of  Post  Office  tradition  there  is  little  or  no  scope 
for  mtelligent  individual  initiative  and  scant  prospect 
of  applying  business  methods  to  the  development  of 
what  should  be  a  rapidly  expanding  commercial  under- 
taking, managed  by  the  best  technical  and  financial 
talent  obtainable. 

There  are  many  experts  qualified  to  speak  with 
authority  on  this  question  who  share  the  views  ex- 
pressed by  Lord  Desborough,  as  president  of  the  Lon- 
don Chamber  of  Commerce,  on  May  18,  1911. 

Many  chambers  of  commerce  besides  the  London  Chamber, 
he  said,  had  discussed  the  subject,  and  they  were  unanimously 
of  opinion  that  it  would  be  very  much  belter  for  the  telephone 
service  of  tins  country  to  be  in  the  hands  of  a  board  of  experts 
than  to  hand  it  over  to  a  Government  Department 
J.usiniss  men  would  like  to  see  an  independent  authority 
formed,  somewhat  on  the  lines  of  the  Port  ui  London  Author- 
ity, t)r  in  any  case  formed  of  business  men  and  (jf  experts 
with  sulhcient  Government  representation.  Such  men  would 
he  alive  to  the  needs  ot  the  business  community  and  accessible 
to  representalions  from  them,  and  would  bring  the  telephone 
service  ot  this  country  up  t.<  the  requirements  of  the  nation  — 
1  lie   I  tnics  (.London;,  December  i,  1913. 


452 


INDEX 


Accounting,    Government,    43- 
45.   144. 
Denmark,    36;     Holland,   36; 
France,  37-41  ;    Austria, 42; 
Railroads   in    Belgium,   46- 
54;   Railroads  in  Germany, 
67-70;   New   Soutli   Wales, 
192 ;    France,    199-204. 
"Active   Service,"  312. 
Alcohol  Monopoly,  vii. 
Switzerland,   12,  18,  207-212; 
Russia,  13,  212-215,  Appen- 
dix   "A" ;    Germany,    205- 
206 ;    Austria,   206-207 ; 
Italy,    207 ;    Belgium,    207 ; 
France,  385-386. 
Alglave,  Emile,  205,  211-212. 
Australia. 

Mines,    191  ;     Labor.    302 ; 
Great   Fortunes,   428;    La- 
bor   Government,    Appen- 
dix "B." 
Austria. 
Government   Ownership,  21 ; 
Accounting.    42;    Cost    of 
Municipal   Ownership.   43 ; 
Railways,     72-74,     275-276, 
2,2,^'      374-375 ;      Municipal 
Housnig,       167;       .Alcohol, 
206-207  \   Mines,  396-397. 
Avebury.    Lord. 
On   Municipal  and   National 
Trading,  67. 


Balfour,  Gerald,  138-139. 
Ballance.  John,  31. 
Banks,  State. 
Prussia.  22. 
Barthou,  Louis,   12,  14,  105. 


Bath,  England. 

Electricity,    132. 
Bavaria. 
.Average    Railway    Receipts, 
74- 
Beaux  .Ans,  7.  8. 
Begg.  I'aithful.  259. 
Belgium. 

Shipping.   21  ;     Railways,   21. 
46-54.    119,   274;    Municipal 
Housing,  165-166;  Alcohol, 
207. 
Belloc.   Hilaire,   189,  401-40J, 
Berlin. 

Milk  Rates,  61. 
Bertreaux-Rabier-Joures.     402 

403- 
Birmingham,   150. 
Tramways,      10.     140;      Gas. 
128;     Electricity.     131-132; 
Housing.   155-156;   Munici- 
pal  Finance,    188-189. 
Bismarck.  Otto.  Furst  von,  56- 

57,  205-206,  401. 
Boston. 

Street  Railways,  140. 
Brewer,  David  J.,  422. 
Bryan,  William  J.,  119. 


Churchill.   Winston,  378. 
Clemenceau,  George,  11,  105. 
Colson,  Clement.  1 16.  257. 
Congress     of    the     Federation 

of    Municipal    Enterprises, 

20. 
Contracts,  401-422. 
Copenhagen. 

Municipal   Accounts,  36. 
Corruption,  423-426. 


453 


INDEX 


Darwin.    Major     Lt-onarJ,     10,    ^ 
1^7,  I3J,  i8g  I 

Uausset,  Louis,  302-J08,  J25. 

Denmark. 

State  Ownership,  17;  Mu- 
nicipal (Ownership,  18;  Ac- 
counting, 36. 

Docks. 

London.  24;    Austria,  42. 

Droz,   Numa,  93,  209-210. 


Edinburgh. 

Gas  and  Electricity,  134. 
Elbeuf,  Mayor  of,  v,  181. 
Electric   Lighting  Act  of   1882. 

In  Great  Britain,  25. 
Electricity. 

Paris,  21;  London,  26;  Den- 
mark, 36;  Great  Britain. 
131.  '33.  295;  Birming- 
ham. 131-132;  Bath,  132; 
Results  in  Edinburgh,  134; 
Glasgow,  134;  Germany, 
260-265. 


Fabian  Society,  66. 
Faurc,   Fernand,  236. 
Field,  William,  66. 
Finance.   Government. 

France.      216-233,      2.^6-240; 
Great  Britain,  233-235. 
Finance,  Municipal. 

Great  Britain,  183-190;    Ger- 
many,   I  (30. 
Folkscone.    England. 

Housing,   158. 
Food   Supplies,  Municipal. 
Switzerland,       175-179; 
France,     179-180,    386-387; 
Italy,   180. 
Forsans,  Paul,  vii. 
Fournier'^,   Eugene,  432. 
France. 
Western     (state)     Railroad, 
viii,  4,  11,  14,  105-113,  116, 


.■>42.  251) ;  Government 
Ownership,  20;  Account 
'"K.  37-41 ;  Railways,  lo.s 
117,  122-123,  259,  272-27(J, 
311-312,  2,72,,  2,77,  387-388. 
403-407;  Bond  Issue.  114- 
117;  Report  on  Cheap 
Housing,  162-174;  Food 
Supplies.  179-180;  Na- 
tional Printing  Office,  192- 
193,  219-222,  256-257,  288- 
289,  339-340 ;  Tobacco 
Monopoly,  194-201,  203- 
204,  289-290,  351-353;  Ac- 
counting, 199-204 ;  Match 
Monopoly,  201-204,  349- 
351;  Government  Finance, 
216-233,  236-240 ;  T  e  1  e  - 
phone.  241,  280-286,  297, 
354-363 ;  Southern  Ca- 
nal, 241  ;  Old  Age  Pen- 
sions. 246;  J'ire  Insurance 
in  the  Cote  d'Or,  250-252; 
Telegraph,  286-288 ;  Army 
and  Navy,  296;  Navy.  308- 
311;  Labor.  308-316,  324- 
343;  Post  Office,  353-354; 
Employment  Agencies,  366- 
368 ;  Alcohol  Monopoly, 
385.-386. 

Franchises. 
Italy,  411-413. 

Freycinet,    Charles    de,    8,    :4. 


Garibaldi,  Giuseppe,    164. 

Gas,  127-130. 
London,  25 ;  Denmark,  36 ; 
.Manchester,  128;  Bir- 
mingham, 128;  Great  Brit- 
ain, 120,  130.  133-135.  317- 
318;  Edinburgh,  134; 
Glasgow,  134;  Paris.  305- 
308. 

Germany. 

Government  Ownership,  22; 
State  Coal  Mines.  22;  Em- 
ployees,  22 :    Railways,  55- 


454 


INDEX 


-'3: 

I2J. 

and 


71.  iqi,  274;  Mousing,  162- 
164:  Municipal  Finance, 
igo;  Alcohol  Monopoly, 
205-206;  f-ire  Insurance, 
249-250;  Electricity,  2(X) 
265;  Municipal  Ownership, 
265-2(y). 
Giolitti,   Giovanni,    i,X.   407-413. 

Glasgow,    150. 

I'ramways,     139-140;     Hous- 
ing,   156-157. 

Great   ISntain. 

Municipal  Kntcrprises, 
Public  Health  Act, 
Knilvvays,  118,  119, 
lyi  ;  Results  of  Gas 
Electric  Enterprises, 
135;  Tramways,  136-150; 
Housing,  151-iho;  Munici- 
pal iMnance,  iS3-irK3;  Go\ - 
ernment  Finance,  233-235 ; 
Piers,  258-259;  Labor.  344- 
347:  Telephone,  363-364; 
Appendix   "C." 

Grierson.  J.,  66 

Griiber,  J.  d.,  ji. 

Guerigny. 

Steel   Plant,  22^227. 


Hadley,   Arthur,   viii. 
Holcombe,  A.   N.,  204. 
Holland. 
Coal    Minos,     18;    Railways, 
18.   74.    IK);    Official   Jour- 
nal,    18;    Accounting,    36; 
Mines,  _^y;  Housiim.'  ]&>. 
Housing,   Municipal. 
Great     Britain,      151-160; 
Europe.   162-174. 
Housing    of    the    Working 
Act     of     .\ugust 
in  Great  Britain, 


Classes 
18,   1890, 


Humanite,  vi. 
Hungary. 
Railways,  73-76,  275; 
ing,    167-168. 


Hous- 


India 

Railways,    i  ig. 
Insurance    Monopoly,   vii. 
Italy.    20,    193,    243-249,    375- 
377-     407-411.;     New     Zea- 
land,   28;     L'ruguay,    249; 
Germany.    249-250;    Switz- 
erland,   250;    France,    250- 
252. 
International    Statistical    Insti- 
tute of    1900,    16,   '7. 
Ireland. 

Tramways,   137. 
Iroti. 

Xew  South  Wales,  192. 
Italy. 
Municipal  Enterprises,  18; 
Law  c>f  March  29.  1903, 
governing  the  Purchase  of 
Municipal  L'ndertakings, 
19:  Insurance  Monopoly, 
20,  193.  243-249,  375-377, 
407-411:  Railways,  77-87. 
122-123,  37.V?,74:  Housing, 
164-165,  F'nod  Supplies, 
180;  Alcohol,  207;  Old 
Age  Pensions,  244;  Fran- 
chises. 4H-413. 

Kelly,  FMmond,  382. 

Labor.  98,  99,  298,  299,  434, 
435- 
Denmark.  17,  18;  German 
Coal  Mines,  22;  German 
Railroads,  70-71  ;  Hungar- 
ian Railroads.  76;  Italian 
Railroads,  80,  83-S5  ;  Swiss 
Railroads,  92-93 ;  New 
Zealand,  98,"  .U3-.^44; 
French  Railways,  113,  403- 
405;  Railways,  124;  Great 
Britain,  128,  143,  147,  316- 
318.  319-320.  344-3^7; 
France.  204,  308-316,  324- 
343;  Paris,  301-308;  .\us- 
tralia,  302.  .Appendix  "B"; 
Prussia,    318-319;     United 


455 


FN'DHX 


States.    .120-324 .    Switzer- 
land,   ,v();     Austria,     338; 
{•'mploymciit      Bureaus     in 
France,  366-368. 
Law.    Bonar,    138. 
Lefevre,   Shaw,    136. 
Legal   Decisions. 

I'Vencii    Railways,   123. 
Leicester. 

Housing.  157 
Let)!!,  Paul,  57. 
Light    Railways    .-\ct   in    Great 

Britain.   1  ^8. 
Lille. 

leleplione,  358-360. 
Liverpool. 

Housing,    157. 
London. 

VV  a  t  e  r,  24  ;  Metropolitan 
Board  of  Works,  24,  26; 
Docks,  24;  Gas,  25;  Elec- 
tricity, 26;  Street  Rail- 
ways, 26,  i42-!47;  Ship- 
ping, 27;  Housing,  27,  152- 

154.    159 
London  County  Council. 

Industrial   Operations.   24-26. 
Lotteries. 

Austria,  42. 
Louvre. 

Roofing  and  Lightni!ig  Rods, 
7;    Art  Collections,  8. 
Luzzatti,  Luigi,   165. 


McDonald,    Ramsay,    189,    389, 

401-402. 
McKenzie,  John,  31. 
Macler,  Charles.  272. 
Majerczik.   Wilhelm,   260. 
Manchester. 

Housing.  157;  Gas.  269. 
Mange,  .Mfred,  57. 
Matches. 

France.  201-204,  349-351. 
Meyer,  Hugo.  61,   140,  141. 
Milhaud,     Edgard,    v,    vi,    vii, 
272,   394-397- 


Millar.   Hon    J.   A.,  97. 

Milwaukee 

Mu!iicipal  Ownership,   182. 

Mines. 
Holland.  18.  37;  Germany, 
22  ;  .\  11  s  I  r  i  a  ,  42  ;  New 
Zealand,  104;  Australia, 
lyi  ;  Prussia,  253-255,  318- 
319.  364-36.5. 

Mints.   17. 

MuUiiis,   Claude   \V.,  431. 

Municipal  Corporations  Act  of 
1882,  23. 

Municipal    Employees  Associa- 
tion, 318. 

Municipal  Ownership,  394-397. 
Denmark,  18;  Italy,  18; 
Pans.  20,  2^)6-267 ;  Aus- 
tria, 21  ;  Great  Britain,  23, 
125-126,  141-144;  Russia, 
27 ;  Cost  in  .'\ustria,  43 ; 
•Milwaukee,  182;  Ger- 
iiia!iy,  265-266 ;  Manches- 
ter. 269. 


National      Civic      Federation, 

22. 
National  Union  of  Gas  Work- 
ers and  General  Laborers, 
318. 
Nationalization  of  the  Soil. 

New  Zealand,  30-32. 
Navies.  258. 
France.   227-230,  308-31 1 ; 
United  States,  257-258. 
New  Jersey. 
Public    Service    Corporation 
of,  420-421. 
New  South  Wales. 

Iron   Industry.    192. 
New  "N'ork  City. 

Labor,  320-324. 

New  Zealand. 

Government   Ownership,  28; 

Prussic   .A.cid   Process.  29; 

Nationalization     of     the 

Soil.    30-32 ;     Property 


45^ 


INDEX 


Holding.  ,v  :  Railways,  94- 
104;    Latior,   ,?4.V344;   Cor- 
ruption.   4-'4:    Great    l-or- 
tuiic^,  4-7- 42S. 
Norway. 

Housing.    i(jK. 


Official    Conscrvati'-m,   -'92-209. 

Opcratin).;   Ratios. 

Prussian  Railways.  70;  Ital- 
ian Railways,  X5 ;  Swiss 
R  a  i  1  w  a  y  s.  gi  :  I>(,nch 
Railways.  1 16,  117.  120. 


Panama  Canal,  415-421. 
Paris. 

Municipal   Ownership.   20-21, 
41,     2^)6-267;     Water,     21. 
34.S-.-^49;      F.lcctricity,     21; 
Street    Railways   and    Sub- 
ways.   21  ;    Stone    Quarry, 
42:      Municipal      Housing, 
170:    Credit.     171  :     Labor, 
,^02-,V1^^.    .^25-.vf'. 
rcllctnn.  Canille,  9,  402. 
rcsrhaud.    .Marcel,  46. 
I'cnsion^.  Coverntnent,  ,^12. 
Italy,    244,    407-411;    France, 
246. 
Peter  the  Great,  212. 
Piers. 

Great    Britain,   258-259. 
Plymouth.   England. 
Housing,    154-155- 
Port  of  London,  24. 
Postal   Savings    Banks. 

Great   Britain,  235. 
Postal  Systems.  17. 
United    States,   2,3 ;     Cost   in 
Holland,   36,   37 ;     Sweden, 
41 ;     France,   222,   2t,o-2t,t,. 
Post  Office. 

France,  353-354 
Pratt,  Edwin,  63,  118. 
Prussia. 
Railways,  viii,  55-71,  74,  118, 


123;  Mines,  253-2-i5,  318- 
319;   Corru[)tion,  423. 

Public   Health   Act  of   1875  in 
Great  Britain,  2^. 

Publications,  State. 
Holland.  18. 

Raffalovich,     Arthur,     it>,      17, 
2(r:,. 

Railways,    Government. 

Prussia,  viii ;  Western 
(state)  Railroad  of 
IVance,  viii,  4,  11.  14,  105- 
113,  116,  242,  259:  Den- 
mark, 17;  Switzerland,  18. 
88-93.  242,  2^^},.  ?,2b.  431  ; 
Holland,  18;  Belgium,  21, 
46-54;  Sweden,  21,  41; 
.\ustria,  43.  72-73,  374-375; 
Germany,  55-71 ;  .Msace- 
Lorraine,  56 ;  Prussia,  56- 
71  ;  Taxation  in  Germany 
and  Great  Britain,  57; 
Hungary,  73-76;  Bavaria, 
74;  Roumania,  74;  Italy, 
77-87.  373-374;  New  Zea- 
land, 94-104;  France.  105- 
117,    1 18- 1 19,   259,   272-279, 

?>7?,.  Ml,  .387-388.  403-407; 
United  States,  119;  Great 
Britain,  122-123;  Labor, 
311-312. 

Rambla  Case.    The,  413-415. 

Raper,  Charles  Lee.  123. 

Rates,  123. 

Belgian  Rail  A-ay,  52-54  ;  Ger- 
man Railway.  59-68;  Ber- 
lin Milk.  61:  .\ustria,  Ts: 
Hungary.  74 ;  Gas  and 
Electricity  in  Great  Brit- 
ain. 122.  129;  Telephone 
in  France,  361-362. 

Raynal.  9. 

Richmond. 
Housing.   157. 

Riemer.  Doctor  Rudolph,  21. 

Roche.  Jules,  216. 

Rolleston,  Hon.  William,  30 

Rosebery,  Earl  of,  159. 


457 


INDEX 


Railway    Receipts, 


I.?. 
A": 


2IJ- 

Mu- 


Rdumania. 
AvcraRc 
74 
Russia. 
Alcohol    Monopoly, 
J 1 5,    Appendix 
nicipal    Ownership,    27. 
Saar,   District  of 

Mines,    253-255,   3^4-3^'5- 
Sal  ford. 

lloiisinR,   15H 
Saniuelson,   Sir   Bernard.  66 
Sanitation. 

I'Vance,  7. 
Schelle,  Ciustave. 
Report    to   the 
Institute.    16- 

Scholefield,  Guy 
Semhat,  Marcel, 
Sewers. 

New  York,  .^2.v.U'4- 
Shaw,  Rernard,  i=;f),  ^ 
Sheffield. 

Tramways.     141-142 
inK,  T58. 
Snowden.    I'liilip.  4.^,^ 
Socialism,  38i-3<;.^.  4,^. 

France,    viii ;    l)efmition    of, 
427. 
Societe      des      Interets      Econ- 

onii(|ues,  vii. 
Shipping?. 

I'elKium.  21  ;  London,  27. 
State    Ownership,    ,^94-,^07- 
Denmark,     17;     I'Vance,    20; 
Austria,  21;  Germany,  22; 
New  Zealand.  28. 
State    Socialism    in    \'ew    Zea- 
land.  2S. 
Stone  Quarries.   Municipal. 

Paris.  42. 
Street   Cleanine;. 
Paris,  303-304. 
Street  Railways. 

Paris,  21  :  I.ondon.  26,  142- 
147;  Belcium,  no;  Great 
Britain,    136-150;    Ireland, 


International 
17.    .VS-4.S,   4'>- 

11.,  .^o. 
280. 


Hous- 


137;  GlasRow.  140;  Bos- 
ton, 140;  BirmiiiRham, 
140;  Sheftield,  141  14-.'; 
(jermaiiy.  2'i5 

Strikes,    (iovernmcnt 
Italian   Railroads,  80. 

Sui)ways 
Paris,  21. 

Supreme  Court   of  the   United 
States,  421. 

.Sweden. 

Railways,  21,41;  State  Own- 
ership, 41  ;  Postal  System, 
41  ;  TelcKraph,  41  ;  Tele- 
phone. 41  ;    llousinR,   168. 

Swinton,  ("amiihcll,   13T. 

Switzerland. 

.\lcohoI  Mono[)oly.  12.  18. 
207-21J,  Ohiuiicld  Duties, 
12,  208:  Railways,  i>^,  88- 
03,  242,  275.  276,  293,  T,2b. 
431;  Housing,  166;  I'"ood 
Supplies,  175-180;  Insur- 
atice,  250 


420. 


Taft,   William    H.,  23, 
Taussig,    ^^    W.,  424. 
Taxation. 

French     Railways,     !20-i2i; 

Great     Britain.     1S6-188 

lOi  ;    German    Railways 

191. 
TelcRraphs.  17. 

I'nited    States,    23; 

Holland.    36,    37 ; 

41  ;     trance,    222, 


Great 


Cost    in 
Sweden, 

2^o-2^^. 

Britain, 


296- 2i^ ; 

^.3.V-'3.v 
Telephones,   17,  294-295, 

Holland,  ,^6-37:   Sweden,  41; 

France,    222.    230-233,    241, 

280-286,     297,     354-363; 

Gieat  Britain,  259,  363-364, 

Appendix   "C." 
Thomas,  Albert,  272. 
Tobacco. 

France,    194-201,    289-290, 

351-353- 


45» 


IMDF-IX 


Tramway  Act  of  1870  in  Great 
Britain.  26,   137,  139. 

I'nitcd    States. 

Pnst  Office  and  TcleRrapli 
Service,  23;  Railways, 
iKj;  Street  Railways.  140- 
141;  Navy,  257  25H;  La- 
bor, 320-324 ;  I-.tTiciency  in 
(jovernment  Service,  3f>o- 
372;  Panama  Canal.  415- 
421. 

UruRuay 

Life  Insurance.  240;  The 
Rambla  Case.  413-41S 


V'aile.   .Samuel.   103. 
VoKel,  Sir  Julius,  28. 
W'addinKton,    Ricliar<l,   402. 
Ward,    Sir    J(isepli,   g; 
Water. 

I'aris,    21,   348-340;    London, 

24;   Denmark,  36. 
VViM),   H.    Laws.   233. 
WcIjI),  Sidney,  433. 
W'clton,   Henjaniin,   267,   320. 
Western     (state)     Railroad    of 

Prance,  viii    4,   11,  14.   105- 

113.   1 16,  24J,  250. 
Wilson,  Woodrow,  420. 
Witte,  Serge  de,   215, 


459 


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ot  Pubhc  Property  Into  Private  Propertv  and  of  Private  Property  In'o 
Public    Property.    XXI    The    Management   of    Public    Property   With 
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Property;  Part  II,  Contract  and  Its  Conditions:  I  Introductory  Observa- 
tions, II  Contract  Defineri  and  Described,  III  The  I'.conomic  Significance 
of  Contract.  IV  Contract  and  IndivitJualism.  V  Criticism  of  the  Indi- 
vidualistic Theory  of  Contract  and  the  Social  Theorv.  VI  Contracts  for 
Personal  Services,  VII  Class  Legislation,  VIII  Facts  As  to  Impairment 
ol  Liberty,  IX  The  Courts  and  Constitutions.  X  Concluding  Observa- 
tions; Appendix  I,   Part   III,  Vested  Interests;  Appendix  II,  Part  IV 
h    w"i    Jr?"aitions;  Appendix  III.   Production.   Present  and  Future, 
A         J      T,"r^'  ^'^•^->  Instructor  in  Stati  tics,  University  of  Wisconsin; 
Appendi.x   IV.  List  of  Cases   Illustrating   the  Attitude  of  the  Courts 
loward  Property  and  Contract  Rights  and  the  Consequent  Evolution  of 
Ihese  Rights  by  Samuel  P.  Orth,  Ph.D.,  Professor  of  Political  Science, 
Cornell   University. 

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McVickar    Professor    of    Political    Economy    in    Columbia 

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